Orders temporarily or permanently banning 95 individuals from working in the banking or financial industry, working as a contractor with the Federal Government, or working as a licensed attorney​​

Orders of restitution and forfeiture and civil judgments entered for $7.5 billion. This includes restitution orders entered for $4.3 billion, forfeiture orders entered for $263.6 million, and civil judgments and other orders entered for $2.95 billion. SIGTARP has already assisted in the recovery of $1.58 billion in assets

Saving $553 million in taxpayer money by preventing TARP funds from going to the now-failed Colonial Bank

SIGTARP Crime Tips

SIGTARP (877-SIG-2009) provides a simple, accessible way for the American public to report allegations, information, and evidence of violations of criminal laws in connection with TARP. SIGTARP can receive information anonymously and protects the confidentiality of whistleblowers to the fullest extent possible.

Investigative Cases

Although the majority of SIGTARP’s investigative activity remains confidential, below is a summary of individual cases in which there have been significant public developments.

On June 15, 2012, Delton de Armas, the former chief financial officer of Taylor, Bean & Whitaker (“TBW”), was sentenced by the U.S. District Court for the Eastern District of Virginia to five years in prison. De Armas previously pled guilty to conspiracy to commit bank and wire fraud and making false statements for his role in a $2.9 billion fraud scheme that led to the failures of TBW and Colonial Bank (“Colonial”). As previously reported, Lee Bentley Farkas, the former chairman of TBW, was convicted at trial in 2011 of 14 counts of conspiracy, and bank, securities, and wire fraud, and sentenced to 30 years imprisonment. On June 20, 2012, the U.S. Court of Appeals for the Fourth Circuit upheld Farkas’ conviction. Colonial Bank was initially approved to receive $553 million in TARP funding that SIGTARP prevented from going to the bank.

De Armas admitted that he and others engaged in a scheme to defraud financial institutions that had invested in TBW’s wholly-owned lending facility, Ocala Funding (“Ocala”). Shortly after Ocala was established, de Armas learned that inadequate assets were backing its loans. This collateral deficit increased to more than $700 million by June 2008. De Armas knew that a subordinate sent false collateral reports to Ocala investors that misrepresented the collateral deficit. De Armas acknowledged that he and former TBW chief executive officer Paul Allen also provided false explanations to investors and regulators about the deficit in Ocala’s collateral. De Armas further admitted that he directed a subordinate to inflate an accounts receivable balance on the books of TBW, which inflated TBW’s financial statements. De Armas admitted knowing that these false financial statements were provided to the Government National Mortgage Association (“Ginnie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) for their determination to renew TBW’s authority to sell and service securities guaranteed by Ginnie Mae and Freddie Mac. De Armas also admitted to reviewing and editing a letter sent by Allen to Ginnie Mae that contained false statements regarding the reason for TBW’s delay in providing audited financial statements to Ginnie Mae.

Six additional defendants pled guilty and were sentenced to prison in 2011 for their roles in the fraud scheme. Allen was sentenced to 40 months in prison; Catherine Kissick, the former senior vice president of Colonial Bank, was sentenced to eight years in prison; Desiree Brown, the former treasurer of TBW, was sentenced to six years in prison; Raymond Bowman, the former president of TBW, was sentenced to 30 months in prison; Sean Ragland, a former senior financial analyst at TBW, was sentenced to three months in prison; and Teresa Kelly, the former operations supervisor in Colonial Bank’s Mortgage Warehouse Lending Division, was sentenced to three months in prison.

This case was investigated by SIGTARP, the FBI, FDIC OIG, the Department of Housing and Urban Development Office of Inspector General (“HUD OIG”), the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”), the Securities and Exchange Commission (“SEC”), and IRS-CI, and was prosecuted by the U.S. Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Virginia.

On March 25, 2015, a federal jury seated in San Francisco, California, convicted Ebrahim Shabudin, of Moraga, California, of seven felony counts of conspiracy, securities fraud, and other corporate fraud offenses stemming from the massive failure of TARP recipient United Commercial Bank (“UCB”) following a six-week jury trial before United States District Judge Jeffrey S. White of the Northern District of California. Shabudin was the Chief Operating Officer and Chief Credit Officer of UCB in 2008 and 2009 and the second most senior officer in executive management at UCB after former Chief Executive Officer, Thomas Shiu-Kit (“Tommy”) Wu.

The jury found Shabudin guilty of conspiring with others within the bank to falsify key bank records as part of a scheme to conceal millions of dollars in losses and to falsely inflate the bank’s financial statements, including those filed with the U.S. Securities and Exchange Commission (“SEC”) and the Federal Deposit Insurance Corporation (“FDIC”) related to the third and fourth quarters of 2008 describing UCB’s “Allowance for Loan Losses.” Also falsified were documents relating to UCB’s quarterly and year-end earnings per share as announced by the bank to the investing public.

More specifically, testimony at trial revealed that in an effort to have the bank “break even” in the third quarter 2008, Shabudin and his co-conspirators delayed downgrading loans despite knowing that collateral had declined in value or was missing, hoping that something would change. However, based on what they knew, that hope was unfounded. For instance they knew that: new appraisals showed collateral value that had declined significantly; there was a third-party offer to buy one loan for far less than what was owed; the bank did not have proper documentation for collateral; and one borrower was in receivership. Furthermore, Shabudin and his co-conspirators were so concerned that inventory securing one loan was either missing or non-existent, that they thought the bank had been defrauded and referred it to law enforcement. Indeed, according to trial testimony the warehouse that was supposed to contain the inventory securing that loan looked like a staged set. Shabudin and his co-conspirators continued this “delay-and-pray” scheme the following quarter, all while the bank applied for and received $298 million in TARP.

The jury convicted Shabudin of one count of conspiracy to commit securities fraud; one count of securities fraud; one count of falsifying corporate books and records; one count of false statements to accountants; one count of circumventing internal accounting controls; one count of conspiracy to commit false bank entries, reports, and transactions; and one count of false bank entries, reports, and transactions. In all, at sentencing which is currently set for June 30, 2015, Shabudin faces a maximum term of 145 years of imprisonment for the charges collectively; up to $16,750,700 in fines and assessments; and up to 27 years of supervised release.

Craig On, Former Chief Financial Officer

On December 9, 2014, Craig S. On, of Berkeley, California, the former Chief Financial Officer of TARP recipient United Commercial Bank (“UCB”), having been indicted on October 30, 2014, pled guilty in the U.S. District Court for the Northern District of California to one count of conspiracy to make a materially false and misleading statement to an accountant for his role in a massive scheme in which he and other executives falsified UCB’s books and records prior to applying for TARP funds. At sentencing, On faces up to five years in federal prison, followed by three years of supervised release.

Thomas Yu, Former Senior Vice President

Additionally, on October 7, 2014, Thomas Yu, a former Senior Vice President of UCB, pled guilty to conspiracy to commit false bank entries, reports and transactions involving his preparation of false and misleading reports in connection with the same scheme. On March 11, 2014, Yu and Ebrahim Shabudin (UCB’s former Executive Vice President, Chief Credit Officer, and Chief Operating Officer) were charged with concealing the true health of the bank in the months prior to the bank receiving TARP funds.

UCB was a commercial bank headquartered in San Francisco with branch offices located throughout the United States as well as in China and Taiwan. On November 14, 2008, UCB received approximately $299 million in TARP funds. Until 2009, the bank’s holding company, United Commercial Bank Holdings, Inc. (“UCBH”), was publicly traded on the NASDAQ. On November 6, 2009, UCB was closed by the California Department of Financial Institutions and taken over by the Federal Deposit Insurance Corporation as receiver. The bank’s failure—less than one year after it received TARP funds—caused taxpayers to lose the initial TARP investment of $298.7 million and $3.7 million in TARP dividends the bank owed to Treasury.

According to court documents, On, beginning in 2009, together with others, including Yu, engaged in a conspiracy to deceive UCB’s auditors by manipulating the bank’s books and records in a manner that misrepresented and concealed the bank’s true financial condition and caused the bank to issue materially false and misleading financial statements in violation of 18 U.S.C. § 371. On further admitted that he failed to inform UCB’s auditors about approximately $67 million in potential losses from the sale of loans or “notes” held by the bank even though he in fact knew that he was required to report this to the auditors.

Furthermore, according to his plea agreement, Yu prepared false and misleading quarterly loan loss allowance reports in which the bank calculated the loss reserves it was required to recognize as part of its quarterly financial reporting in the third and fourth quarters of 2008. By failing to properly downgrade poor performing loans, Yu admitted that he helped the bank avoid taking required loan loss reserves which, in turn, enabled the bank to artificially inflate its reported earnings to the public. At sentencing, Yu faces up to five years in federal prison, followed by three years of supervised release.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Bureau of Investigation, the Federal Deposit Insurance Corporation Office of Inspector General, and the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau.

Lauren Tran, Former Vice President and Manager of Credit Policy

Lauren Tran, the former Vice President and Manager of Credit Policy at United Commercial Bank (“UCB”), pled guilty on June 15, 2011, in the U.S. District Court for the Northern District of California to conspiracy to commit securities fraud, falsifying corporate books and records, and lying to auditors. Former UCB senior executives, Ebrahib Shabudin and Thomas Yu, were indicted on similar charges in September 2011 and are currently awaiting trial.

In her guilty plea, Tran admitted to engaging in a conspiracy and fraudulent scheme to conceal UCB’s growing inventory of impaired loans and to avoid disclosing its significant loan losses. Tran admitted to conducting the fraud scheme by knowingly and willingly falsifying UCB’s books and records, over-valuing the collateral securing certain UCB loans, and misleading UCB’s independent auditor by withholding material appraisal information. As a result of the conspiracy and fraud scheme, UCB is alleged to have issued false and misleading public statements and reports in 2009 regarding its 2008 year-end financial condition and performance. The charges carry a maximum penalty of five years imprisonment and a fine. Tran’s plea was unsealed by the court in October 2011.

John Cinderey, Former Executive Vice President

In another action related to UCB, on March 27, 2012, former UCB executive vice president, John Cinderey agreed to settle charges brought by the SEC alleging that Cinderey misled the bank’s independent auditors regarding the financial statements of UCB and UCBH Holdings, Inc. (“UCBH”). Cinderey had previously agreed to pay a $40,000 civil penalty in an administrative action brought by the FDIC in connection with the same conduct.

The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the SEC, the FBI, the FDIC OIG, and the Office of Inspector General of the Board of Governors of the Federal Reserve System (“FRB OIG”).

On October 23, 2013, after a four-week trial and one day of deliberation, a Federal jury in Manhattan found Bank of America Corporation and its predecessors, Countrywide Financial Corporation and Countrywide Home Loans, Inc. (collectively, “Bank of America”) liable for defrauding the United States, namely the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), by selling thousands of defective loans to them.

The jury also found Rebecca Mairone, a former senior executive from Countrywide, liable for defrauding the United States in connection with her role in the fraudulent scheme.

On July 30, 2014, in the United States District Court for the Southern District of New York, U.S. District Judge Jed S. Rakoff ordered Bank of America, in which taxpayers invested $45 billion through the TARP bailout, to pay a significant civil penalty of $1.27 billion for engaging in an intentional scheme to defraud the United States by selling thousands of defective toxic loans to the Government sponsored entities, Fannie Mae and Freddie Mac (the “GSEs”). Additionally, former executive Rebecca Mairone was ordered to pay a civil penalty of $1 million to the Government. On October 23, 2013, a Federal jury in New York, New York, found Bank of America, N.A., and its predecessors, Countrywide Financial Corporation and Countrywide Home Loans, Inc. (collectively, “BAC”), and Mairone liable for the fraud after a four week trial.

In determining these penalty amounts, the Court highlighted the egregious nature of the fraud, stating that “[the bank’s loan] process was from start to finish the vehicle for a “brazen” fraud by the defendants, driven by a hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.” The Court further explained that its “careful review of the evidence ha[d] convinced the Court, as it did the jury, that the evidence of the defendants’ fraudulent scheme and fraudulent intent was ample” and, accordingly, that punitive and deterrence penalties were warranted.

The evidence substantiated that starting in August 2007, BAC developed and rolled out a program known as the “Hustle” (which stood for “High Speed Swim Lane,” or “HSSL”). As its name implies, the Hustle focused on generating and selling a high volume of mortgages at high speed to the GSEs. To do so, BAC jettisoned reasonable steps to assure loan quality in favor of volume, speed and profits; specifically, it eliminated underwriter reviews of mortgage loans and removed critical quality control checks and fraud prevention measures that would have slowed down the origination process. At the same time, BAC changed its compensation structure to base performance bonuses solely on volume. Furthermore, BAC and Mairone pushed the Hustle program despite repeated warnings that doing so would yield disastrous results, including defaults on the loans. In particular, as shown in the course of the trial, even when the Bank’s own internal quality reports evidenced deteriorating loan quality, BAC and Mairone “shunted critics and criticisms aside, doubled down on their risky behavior, and applied ever more pressure on loan specialists to ignore loan quality concerns.” Finally, the “defendants purposefully ignored their contractual obligations to report to [the GSEs] all loans-identified as defective, reporting only six HSSL loans as such when, in fact, there were thousands.”

Through the Hustle program, BAC originated thousands of poor quality loans and sold them to the GSEs based on lies that the loans were investment quality and met the GSEs’ requirements, cheating the GSEs of money in the process. As a result, BAC fraudulently added billions of dollars to its bottom line and paid executives bonuses based on the speed and volume of the defective GSE loans they processed.

Bank of America received a total of $45 billion, in three infusions, in TARP funds in 2008 and 2009. Bank of America repaid the $45 billion TARP investment in full on December 9, 2009.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Housing Finance Agency Office of Inspector General.

On February 4, 2010, the New York Attorney General charged Bank of America Corporation (“Bank of America”), its former Chief Executive Officer Kenneth D. Lewis, and its former Chief Financial Officer Joseph L. Price with civil securities fraud. According to the allegations, in order to complete a merger between Bank of America and Merrill Lynch & Co., Inc. (“Merrill Lynch”), the defendants failed to disclose to shareholders spiraling losses at Merrill Lynch. Additionally, after the merger was approved, it is alleged that Bank of America made misrepresentations to the Federal Government in order to obtain tens of billions of dollars in TARP funds. The investigation was conducted jointly by the New York Attorney General’s Office and SIGTARP, and the case remains pending in New York state court.

SIGTARP also assisted the Securities and Exchange Commission (“SEC”) with its Bank of America investigation. On February 22, 2010, the Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, approved a $150 million civil settlement between the SEC and Bank of America to settle all outstanding SEC actions against the firm. The court found that Bank of America failed to disclose adequately to its shareholders, prior to their approval of a merger with Merrill Lynch, the extent of additional material losses that Merrill Lynch had suffered. Additionally, the court found that the proxy statement sent to shareholders in November 2008 failed to disclose adequately Bank of America’s agreement to allow the payment of bonuses to Merrill Lynch employees prior to the merger. In addition to the $150 million payment, Bank of America also agreed to the following settlement requirements:

Engaging an independent auditor to assess and report on the effectiveness of the company’s disclosure controls and procedures.

Furnishing management certifications signed by the chief executive officer and chief financial officer with respect to proxy statements.

Retaining disclosure counsel to the audit committee of the company’s board of directors.

Adopting independence requirements beyond those already applicable for all members of the compensation committee of the company’s board of directors.

Retaining an independent compensation consultant to the compensation committee.

Implementing and disclosing written incentive compensation principles on the company’s website and providing the company’s shareholders with an advisory vote concerning any proposed changes to such principles.

Providing the company’s shareholders with an annual “say on pay” advisory vote regarding the compensation of executives.

Kenneth Lewis

On March 25, 2014, Bank of America Corporation (“Bank of America”) and its former CEO, Kenneth Lewis, agreed to settle a lawsuit filed by the New York Attorney General alleging that the bank and its top executives fraudulently withheld from investors forecasted losses in excess of $9 billion at Merrill Lynch & Co., Inc. (“Merrill”) for its 2008 fourth quarter, while at the same time asking shareholders to approve a merger with Merrill. Despite concealing these forecasted losses from investors, Bank of America then immediately sought massive financial assistance from the Federal Government in the form of $20 billion in TARP funds claiming that there had been a “material adverse change” in Merrill’s financial condition over the previous three months. Bank of America continued to conceal Merrill’s forecasted losses until mid-January 2009, when disclosure of Merrill’s multibillion dollar fourth quarter loss led to a $50 billion sell-off in the shares of Bank of America. The lawsuit also alleges that Lewis and the bank’s former CFO, Joe Price, misrepresented to shareholders the impact that the merger would have on Bank of America’s future earnings.

According to settlement documents, Bank of America agreed to pay $15 million to reimburse the cost of the investigation. Bank of America also agreed to create numerous corporate reforms such as creating a new corporate development committee; enhancing the audit, disclosures, enterprise risk and corporate governance committee charters; revising the corporate governance guidelines; and implementing and maintaining incentive compensation principles that are published on the Bank of America website. As part of the settlement, Kenneth Lewis agreed to a 3-year ban from serving as an officer or director of a public company, and to pay $10 million to the State of New York for his role in the matter.

This case was investigated by SIGTARP and the Office of the Attorney General for the State of New York.

Joe L. Price

On April 17, 2014, Joe L. Price, former CFO of Bank of America Corporation (“Bank of America”), agreed to settle a lawsuit filed by the New York Attorney General for his role in the bank’s actions as it sought to merge with Merrill Lynch & Co. in 2008. As part of the settlement, Price is barred from serving as an officer or director of a public company for 18 months and will pay $7.5 million.

Despite its top executives’ specific knowledge of mounting losses at Merrill Lynch – forecasted to exceed $9 billion for its 2008 fourth quarter – Bank of America fraudulently withheld the information from shareholders prior to their vote on the proposed merger, and also misrepresented the impact the merger would have on Bank of America’s future earnings. Immediately after concealing these forecasted losses from investors, Bank of America sought massive financial assistance from the Federal Government in the form of $20 billion in TARP funds claiming that there had been a “material adverse change” in Merrill’s financial condition over the previous three months. Bank of America continued to conceal Merrill’s forecasted losses until mid-January 2009, when disclosure of Merrill’s multibillion dollar fourth quarter loss led to a $50 billion sell-off in Bank of America shares.

As previously reported, on March 26, 2014, the New York Attorney General announced a settlement with Bank of America and its former Chairman and Chief Executive Officer, Kenneth D. Lewis, with respect to the same allegations regarding the bank’s merger with Merrill Lynch. As part of that settlement, Lewis was barred from serving as an officer or director of a public company for three years and will pay $10 million. In addition, the settlement requires Bank of America to implement numerous corporate reforms such as those involving its audit, disclosure, risk, and corporate governance functions, and incentive compensation principles, and will also pay $15 million.

Bank of America received $15 billion in Federal funds through TARP on October 28, 2008; an additional $10 billion on January 9, 2009; and $20 billion on January 16, 2009. It repaid taxpayers’ combined $45 billion TARP investment on December 9, 2009.

This case was investigated by SIGTARP and the Office of the Attorney General for the State of New York.

On August 20, 2014, TARP recipient Bank of America Corporation (“BAC”), entered into an historic $16.65 billion settlement agreement with the Department of Justice, among others, to resolve civil investigations against BAC and its former and current subsidiaries, including TARP recipient Merrill Lynch and Countrywide Financial Corporation (“Countrywide”), involving: the bank’s packaging, sale, arrangement, structuring and issuance of residential mortgage-backed securities (“RMBS”) and collateralized debt obligations (“CDOs”); the bank’s practices concerning the underwriting and origination of risky mortgage loans; and the bank’s misrepresenting the quality of those loans to, among others, the Government-sponsored enterprises, Fannie Mae and Freddie Mac (the “GSEs”).

Of the $16.65 billion settlement, $1 billion relates to the resolution of SIGTARP investigations into (and three private “whistleblower suits” filed under seal pursuant to the False Claims Act) the origination of defective residential mortgage loans by Countrywide’s Consumer Markets Division and BAC’s Retail Lending division, as well as the fraudulent sale of such loans to the GSEs. The settlement does not release individuals from civil charges, nor does it absolve BAC, its current or former subsidiaries and affiliates, or any individuals from potential criminal prosecution.

BAC also must cooperate fully with investigations or prosecutions into the conduct at issue.

According to the settlement agreement, BAC admitted that, from 2005 to 2007, Countrywide unloaded toxic mortgages on the GSEs, well-aware that: (i) many of the residential mortgage loans it had made to borrowers were defective; (ii) many of the representations and warranties made to the GSEs about the quality of the loans were inaccurate; and (iii) it did not self-report to the GSEs mortgage loans it had internally identified as defective.

More specifically, in the run-up to the financial crisis Countrywide undertook to expand its loan offerings based on “salability” and with little regard to risk. For example, in late 2006 Countrywide began offering “Extreme Alt-A” loans. One Countrywide executive called this a “hazardous product,” and, accordingly, asked to see “a detailed implementation plan” for originating and selling the Extreme Alt-As “such that [Countrywide was] not left with the credit risk.” Similarly, between 2005 and 2007, Countrywide executives recognized the risk in its origination of another product, “Pay Option Arms,” and warned that these loans should be sold or securitized, fearing both “a financial and reputational catastrophe” in the event they were retained on Countrywide’s balance sheet. Despite this knowledge, Countrywide’s offering documents did not, among other things, describe the Extreme Alt-A program, nor did they disclose that the Pay Option Arm loans were loans that it elected not to hold for its own investment portfolio because they had risk characteristics that Countrywide’s management had identified as inappropriate for its balance sheet.

The settlement also resolves the Government’s additional claims under the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”) for loans fraudulently sold to the GSEs. As to the FIRREA investigation, BAC admitted that, in the run-up to the financial crisis throughout 2006 and 2007, Merrill Lynch regularly told investors the loans it was securitizing were made to borrowers who were likely and able to repay their debts despite knowing, based on diligence it had performed on samples of the loans, that a significant number had material compliance and underwriting defects, including as many as 55 percent in a single pool. BAC further admitted that Merrill Lynch disregarded its own due diligence and securitized loans it had identified as defective, leading one Merrill Lynch consultant to “wonder why we have due diligence performed” if Merrill Lynch was going to securitize the loans “regardless of issues.”

Finally, as part of the settlement, BAC will pay $7 billion worth of relief to remedy harms to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness. BAC will also retain an independent monitor to determine whether it has complied with the consumer relief portion of the settlement.

In addition to SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, the Federal Housing Finance Agency Office of Inspector General as part of President Obama’s Financial Fraud Enforcement Task Force, RMBS Working Group, and other Government agencies conducted investigations that led to this settlement.

On July 3, 2014, SunTrust Mortgage, Inc., a subsidiary of TARP recipient and mortgage servicer, SunTrust Banks, Inc. (collectively, “SunTrust”), entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Western District of Virginia, resolving a criminal investigation, by SIGTARP and the U.S. Attorney’s Office, of SunTrust’s administration of the Home Affordable Modification Program (“HAMP”), a foreclosure assistance program created and funded by the Federal Government during the financial crisis. SunTrust agreed to pay $320 million to resolve allegations of mail fraud, wire fraud and false statements to the U.S. Treasury in connection with its HAMP program. To date, SunTrust has paid $195 million and has reserved $95 million for additional victim restitution.

As detailed in the agreement, from March 2009 to at least December 2010, SunTrust misled numerous mortgage servicing customers who sought mortgage relief through HAMP. Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations and regarding how long SunTrust would take to make a decision on whether borrowers qualified for HAMP. SunTrust also failed to process HAMP applications in a timely manner. So significant was SunTrust’s failure in this regard, that the floor of the room in which the bank dumped the voluminous unopened HAMP applications actually buckled under the packages’ sheer weight. SunTrust admitted that it did not clean up its HAMP program until its regulators and the U.S. Government, through SIGTARP and its partners, intervened through the criminal investigation.

As a result of SunTrust’s significant mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms, including, among other things:

SunTrust mass deceived borrowers for HAMP, without reviewing their applications SunTrust provided false and inaccurate information regarding some of its HAMP denials to Treasury.

Some HAMP applications never received a decision from SunTrust on whether they qualified for a HAMP modification.

Damage to borrowers’ credit scores through SunTrust’s improper reporting of borrowers as delinquent: SunTrust improperly reported as many as 75% of its customers who were current on their mortgages as being delinquent during the trial period and reported some borrowers as being in greater delinquency than they actually were;

Excessive amounts of accumulated mortgage interest which was contrary to HAMP guidelines which required SunTrust to apply the reduced interest rate received through the HAMP modification; and

Borrowers were regularly on trial periods for close to, if not more than, a year and in some cases two years; reduced availability of alternative options such as renting or selling one’s home.

SunTrust improperly began foreclosure proceedings against certain borrowers while on HAMP trials and improperly foreclosed on some homes while the borrower was in a HAMP trial.

The $320 million SunTrust agreed to pay, to resolve the criminal investigation, is to be paid as follows:

Restitution – SunTrust will pay $179 million in restitution to compensate borrowers for damage caused by its mismanagement of HAMP. That money will be distributed to borrowers in eight pre-determined categories of harm. If more than $179 million is needed, the bank will also guarantee an additional $95 million for additional restitution. SunTrust will also pay $10 million in restitution directly to Fannie Mae and Freddie Mac.

Forfeiture – SunTrust will pay $16 million in forfeiture to the Treasury Department forfeiture fund. This money will be available to law enforcement agencies working on mortgage fraud and other matters related to the misuse of TARP funds.

Prevention – SunTrust will pay $20 million to establish a fund for distribution to organizations which provide counseling and other services to distressed homeowners. Specifically, SunTrust will pay this amount to a grant administrator selected by the Government. The funds, in turn, will be awarded to housing counseling agencies and other legitimate non-profits devoted to consumer counseling and advocacy.

Furthermore, SunTrust also agreed to implement corporate remedial measures, including changes to its corporate policy, procedures and organization, such as designating employees to oversee and conduct assessment of, its mortgage modification, loss mitigation, and servicing functions to prevent similar conduct from recurring in the future.

In November and December 2008, SunTrust Banks, Inc., of Atlanta, Georgia, the parent company of SunTrust, received $4.85 billion in Federal taxpayer funds through TARP. The bank repaid the TARP investment in March 2011.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Virginia, the Federal Housing Finance Agency Office of Inspector General, and the U.S. Postal Inspection Service.

On July 23, 2014, Jesse C. Litvak, a former senior trader and managing director at the global securities and investment banking firm Jefferies, LLC (“Jefferies”), was sentenced by Chief U.S. District Judge Janet C. Hall to two years in Federal prison, followed by three years of supervised release as well as a $1.75 million fine for defrauding TARP and customers trading in residential mortgage-backed securities (“RMBS”). After a three-week trial in U.S. District Court for the District of Connecticut, a Federal jury convicted Litvak on all 15 counts related to his scheme, including ten counts of securities fraud, one count of defrauding TARP, and four counts of making false statements in a matter within the jurisdiction of the U.S. Government. Victim-customers included funds that were established by the U.S. Department of the Treasury’s Public-Private Investment Program (“PPIP”). Litvak was arrested by SIGTARP agents on January 28, 2013.

PPIP was intended to purchase certain troubled real estate-related securities, including types of RMBS from financial institutions in order to allow those financial institutions to free up capital and extend new credit. Beginning in late 2009, as part of PPIP, the Federal Government used more than $20 billion in TARP money to fund the Public-Private Investment Funds (“PPIF”) that would purchase the troubled securities. To participate in the PPIP program, PPIF managers agreed to buy or sell only certain types of RMBS, including those in which Litvak specialized. RMBS are bonds that comprise large pools of residential mortgage loans created by banks and other financial institutions. RMBS bonds are sold through broker-dealers, who execute individually negotiated transactions.

As a broker-dealer in this market, only Litvak – not the bond seller or buyer – knew the sell and buy prices of RMBS bonds. As part of his scheme, Litvak exploited this lack of transparency by misrepresenting the seller’s asking price to the buyer as well as the buyer’s asking price to the seller. Having manufactured the fraudulent buy and sell prices, Litvak illegally increased commissions and kept the profits for Jefferies and, ultimately, himself. Litvak also created fictitious third-party sellers to sell bonds actually held in Jefferies’ inventory. This allowed Litvak to charge the buyer an extra broker commission that Jefferies was not entitled to as Jefferies was the true owner. Through these schemes, Litvak stole more than $2 million from numerous PPIP funds and multiple private investment funds.

In addition, as previously reported, on January 29, 2014, Jefferies entered into a non-prosecution agreement with the U.S. Attorney’s Office for the District of Connecticut relating to its role in the purchase and sale of RMBS. Specifically, as part of the agreement, Jefferies agreed to pay $25 million: up to $11 million to customers harmed in the fraudulent trades, at least $10 million to the U.S. Treasury, and $4 million to the U.S. Securities and Exchange Commission.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Federal Bureau of Investigation as part of the Residential Mortgage-Backed Securities Working Group.

On February 24, 2015, Justin T. Brough, a former Senior Vice President of TARP recipient Bank of America (“BOA”), of North Las Vegas, Nevada, pled guilty in the United States District Court for the District of Nevada to one count of misapplication of bank funds in connection with a scheme designed to bypass the bank’s controls on requiring personal guarantees for certain loans and that led to more than $6.4 million in losses to BOA on two business-related loans. At sentencing, which is scheduled for May 28, 2015, Brough faces up to thirty years in Federal prison.

According to court documents, Brough was a senior vice president at BOA in Las Vegas, where he served as a business banking market executive and provided financial services, including origination of loans, to high-net-worth clients. Brough admitted to misapplying bank funds in connection with two business loans: a $6.3 million short-term construction loan, and a $600,000 line of credit in connection with the acquisition of a business. Brough further admitted that neither borrower met the bank’s underwriting requirements and thus neither in fact qualified for the loans. Brough also admitted that he falsified documents to help both borrowers obtain the loans, including forging signatures on loan papers.

When the borrowers had difficulty making payments on the loans, Brough misused the bank’s general ledger fund in an attempt to conceal his scheme and, in total, made $436,676 in payments on the loans on the borrowers’ behalf and keep the loans current. He admitted that he disguised those payments as “goodwill,” “miscellaneous adjustments,” and refunds of various fees, among other ways. He also conceded that he kept each of the individual loan payments under $10,000 so he would not need additional approval within BOA. Ultimately, both borrowers defaulted on the loans and, according to the plea agreement, the loss to BOA was almost $6.5 million: $5,291,000 on the first loan and $1,177,167 on the second.

BOA received a total of $45 billion in TARP funds, and repaid the funds in full in December 2009.

The case is being investigated by SIGTARP, the Federal Bureau of Investigation and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On January 29, 2014, Jefferies, LLC (“Jefferies”), an investment bank and broker-dealer, entered into a non-prosecution agreement with the U.S. Attorney’s Office for the District of Connecticut relating to the firm’s purchase and sale of residential mortgage-backed securities (“RMBS”). Jefferies agreed to pay $25 million as part of the agreement related to abuses in the trading of mortgage-backed securities.

In March 2009, the Department of the Treasury (“Treasury”) announced the creation of the Public-Private Investment Program (“PPIP”), with the goal to create partnerships with private investors to buy certain troubled real-estate securities in the wake of the financial crisis. These partnerships, known as Public-Private Investment Funds (“PPIF”), would invest in mortgage-backed securities using private investments and TARP equity. In response to the financial collapse, the Federal Government used more than $20 billion from TARP to fund the PPIFs. Each PPIF was established and managed by a PPIP fund manager selected by Treasury. Jefferies’ Mortgage and Asset-Backed Securities Trading Group made trades in RMBS with PPIFs, among others.

Starting in 2009, certain Jefferies traders fraudulently increased the profitability of certain Jefferies trades in various ways, including misrepresenting the RMBS seller’s asking price to the buyer, misrepresenting the buyer’s asking price to the seller, and concealing the fact that some bonds were being sold from Jefferies’ inventory in order to charge buyers an extra commission. The difference in sale and buy prices, and the extra commission charged to customers, were illegal profits obtained through Jefferies fraudulent trading practices. Additionally, some of Jefferies management in the fixed income division were aware of the fraudulent trading practices and failed to stop it. As part of the agreement, Jefferies agreed to pay $25 million: up to $11 million to customers harmed in the fraudulent trades, at least $10 million to the Treasury, and $4 million to the U.S. Securities and Exchange Commission.

Jesse C. Litvak, a former Jefferies senior trader and managing director, was convicted on March 7, 2014, for TARP fraud, securities fraud, and making false statements to the Federal Government. Litvak was arrested by SIGTARP agents on January 28, 2013, and is scheduled to be sentenced on May 30, 2014.

This matter is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Federal Bureau of Investigation as part of the Residential Mortgage-Backed Securities Working Group.

On March 11, 2015, Matthew Katke, of New York, New York, pled guilty in the United States District Court for the District of Connecticut, to one count of conspiracy to commit securities fraud in connection with his participating in a multimillion dollar securities fraud scheme. In addition, Katke also entered into an agreement to cooperate in the government’s ongoing investigation of fixed income securities such as residential mortgage-backed securities (“RMBS”). This criminal activity came to light during SIGTARP’s initiative on PPIP-related activities.

According to court documents and statements made in court, between April 2008 and August 2013, Katke was a registered broker-dealer and managing director at RBS Securities Inc. RBS is a global securities firm with headquarters in Stamford, Conn. RBS also has a trading floor in Stamford where Katke and other members of RBS’s Asset Backed Products division traded fixed income investment securities such as RMBS and collateralized loan obligations (“CLOs”). In pleading guilty, Katke admitted that he and others conspired to increase RBS’s profits on CLO bond trades at the expense of customers. As part of the scheme, Katke and his co-conspirators made misrepresentations to induce buying customers to pay inflated prices and selling customers to accept deflated prices for CLO bonds, all to benefit RBS.

Katke further admitted that the conspiracy was perpetrated in two ways. In certain transactions, Katke misrepresented the CLO seller’s asking price to the buyer (or vice versa), keeping the difference between the price paid by the buyer and the price paid to the seller for RBS. In other transactions, Katke misrepresented to the CLO buyer that bonds held in RBS’s inventory were being offered for sale by a fictitious third-party seller invented by Katke, which allowed Katke to charge the buyer an extra commission to which RBS was not entitled. The investigation revealed numerous fraudulent transactions by Katke that cost at least 20 victim customers—including firms affiliated with TARP recipient banks—millions of dollars.

At sentencing, which is scheduled for November 20, 2015, Katke faces a maximum of five years in federal prison.

This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted by the United States Attorney’s Office for the District of Connecticut in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force’s Residential Mortgage Backed Securities Working Group, a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis and the federal government’s subsequent bailout.

On December 4, 2013, the SEC entered an administrative order against Fifth Third Bancorp (“Fifth Third”) and Daniel Poston, its former chief financial officer, for failing to properly report Fifth Third’s non-performing commercial real estate loans in the third quarter of 2008. Fifth Third received $3.4 billion in TARP funds in December 2008.

According to the SEC’s order, Fifth Third suffered a substantial increase in its non-performing assets due to the decline in the real estate market in 2007 and 2008 and borrowers’ failure to repay their loans as originally required. Ultimately, in the third quarter of 2008, the company decided to pursue a sale of these troubled loans. In September 2008, Fifth Third entered into agreements with two loan brokers to market and sell the loans. When Fifth Third decided to sell the loans, U.S. accounting rules required the company to reclassify the loans from “held for investment” to “held for sale” and to carry them at fair value. Despite the actions taken by Fifth Third to market and sell the non-performing loans, Fifth Third falsely continued to classify the loans as “held for investment,” which incorrectly suggested that the company had not made the decision to sell the loans. As Fifth Third’s chief financial officer, Poston was aware of Fifth Third’s decision to sell the loans as well as the accounting rules governing such a sale. Despite that knowledge, Poston did not direct the company to classify and value the loans as required. He also inaccurately represented Fifth Third’s loan classifications to its auditor, and falsely certified the company’s inaccurate quarterly report submitted to the SEC in November 2008.

To settle the SEC’s charges, Fifth Third agreed to pay a $6.5 million civil money penalty. Poston agreed to pay a $100,000 civil money penalty and to be suspended from appearing or practicing as an accountant before the SEC for one year.

On January 27, 2014, the U.S. Securities and Exchange Commission (SEC) issued sanctions and a cease and desist order against the California based registered investment adviser Western Asset Management Company (“Western Asset”) for conducting illegal cross-trades of residential mortgage-backed securities (“RMBS”) that favored certain clients over others and involved the Public-Private Investment Fund (“PPIF”). In June 2009, Treasury selected Western Asset to establish a PPIF as part of the Public-Private Investment Program of TARP.

The sanctions against Western Asset include a $1 million civil monetary penalty payable to the U.S. Department of the Treasury (“Treasury”) and $7.4 million payable to Western Asset clients harmed by the illegal scheme.

A “cross-trade” occurs when an investment advisor sells an RMBS security held by one of its clients directly to one or more of its other clients without exposing the transaction to the market. Although cross-trades can benefit clients in certain circumstances by saving transaction costs, they also represent a potential conflict of interest for the advisor, who has a duty to obtain the best execution prices for both its buying and selling clients. Further, some client accounts are specifically prohibited or restricted from engaging in cross-trades, particularly Registered Investment Companies and accounts regulated by the Employee Retirement Income Security Act of 1974. As a PPIF manager, Western Asset was also prohibited from conducting cross-trades to or from the PPIF and had established internal trading policies and procedures that explicitly prohibited cross-trades involving the PPIF.

During the height of the financial crisis, many Western Asset clients were forced to liquidate RMBS securities for compliance reasons. At the same time, the PPIF managed by Western Asset had more than $2 billion of capital available for investment in RMBS securities. Investigators discovered that from 2007 through 2010, Western Asset had engaged in a pattern of cross-trades in violation of Section 17(a)(1) and (2) of the Investment Company Act, and Section 206(2) of the Advisors Act and PPIF guidelines.

To accomplish the cross-trades, Western Asset pre-arranged with a cooperating broker-dealer to sell the RMBS securities to the broker at a price equal to the highest current bid otherwise available. Western Asset then re-purchased the security from the broker at a small pre-arranged markup over the sales price. The inter-positioning of the broker-dealer in these transactions did not remove them from the prohibitions of Section 17(a). By cross-trading the securities for the highest bid price, instead of the average between the bid and the asking price, as would be required under Section 17(a), Western Asset deprived its selling clients of their share of the market savings, an amount totaling approximately $6.2 million.

This case was investigated by SIGTARP, the U.S. Securities and Exchange Commission, and the Department of Labor - Office of Inspector General.

On February 9, 2012, the Federal Government and 49 State Attorneys General reached a $25 billion settlement with the nation’s five largest mortgage servicers over mortgage loan servicing mishandlings, foreclosure abuses, and fraud. Under the terms of the agreement, Bank of America Corporation (“Bank of America”), JPMorgan Chase & Co. (“JPMorgan”), Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC) will commit $25 billion to resolve certain violations of state and federal law. As part of the global agreement, certain False Claim Act lawsuits being investigated by SIGTARP and its law enforcement partners will be resolved.

Bank of America

On February 9, 2012, the U.S. Attorney for the Eastern District of New York announced a $1 billion settlement with Bank of America to resolve allegations that Bank of America, and its Countrywide Financial subsidiaries, among other things, defrauded the Federal Government by failing to determine the eligibility of homeowners to participate in HAMP. A qui tam, or whistleblower, complaint alleged that it was more lucrative for the bank to deliberately force otherwise qualified homeowners to programs outside of HAMP so that it could either profit from foreclosure proceedings, force the homeowner into a more costly proprietary mortgage modification than HAMP would permit, or otherwise profit from continuing to service the defaulting and defaulted mortgage. Gregory Mackler, who filed the complaint under the whistleblower provision of the False Claims Act, will receive a portion of the $1 billion settlement once the agreement is finalized by the court.

JPMorgan

On February 10, 2012, the U.S. Attorney for the District of Massachusetts announced a $6.2 million settlement with JPMorgan to resolve allegations that JPMorgan, and institutions acquired by JPMorgan, failed to use adequate loss mitigation efforts as mandated by federal regulation in handling loans with individuals who had fallen behind on their mortgage payments. In addition, the complaint alleges that JPMorgan defrauded HAMP by failing to follow HAMP program guidelines and foreclosing on homeowners in HAMP trial modifications. Robert Harris, as whistleblower, will receive $1.2 million of the $6.2 million settlement.

Ally Financial

On March 12, 2012, the U.S. Attorney for the Western District of North Carolina announced a $95 million settlement with Ally Financial, Bank of America, JPMorgan, Wells Fargo & Company, and Citigroup Inc. to resolve allegations that the banks made false claims in connection with their failure to obtain required mortgage assignments, were involved in servicing misconduct and the charging of inappropriate costs, and used false documents in Federal Government mortgage guarantee claims. The defendants, according to the complaint, falsely represented that they held good title to the notes and mortgages in connection with claims they submitted on the mortgage guarantees, resulting in payments from the Government that would not have been made if the Government had been aware of the true facts. Lynn Szymoniak, as whistleblower, will receive $18 million of the $95 million settlement. Ally Financial remains in TARP and the Department of Treasury holds 74% of Ally Financial’s common stock.

On October 16, 2014, Zulfikar Esmail and his wife, Shamim Esmail, former senior executives and members of the board of directors of Wilmette, Illinois-based TARP recipient Premier Bank, both of Evanston, Illinois, were charged in Illinois state court with defrauding First Midwest Bank as well as the Department of the Treasury’s Community Development Financial Institutions Fund (“CDFI”). These charges follow indictments in August 2013 charging the Esmails and two other members of Premier’s board of directors with operating a long-running criminal scheme that is alleged to have defrauded TARP out of $6.8 million and caused Premier Bank to fail on March 23, 2012, costing the FDIC $64.1 million.

The October 2014 charges against the Esmails allege that yet more fraud was committed while the pair served on Premier Bank’s Board. Specifically, Zulfikar Esmail was indicted in DuPage County, Illinois, on two counts of financial institution fraud and one count of loan fraud for fraudulently obtaining an $8.1 million loan from First Midwest Bank in 2009, which also was a recipient of TARP funds. Both Zulfikar and Shamim Esmail were charged in DuPage County with defrauding First Midwest Bank in a workout agreement after they defaulted on the loan. Additionally, Shamim Esmail also was indicted in Cook County, Illinois, on additional charges including on two counts each of theft and wire fraud in connection with defrauding the Treasury Department’s CDFI fund. As a result of her actions, it is alleged that Premier Bank fraudulently received more than $1 million in funds in 2010 and 2011 from two programs under the CDFI Fund, both of which were designed to assist banks through the provision of banking services to economically distressed communities.

On August 6, 2013, following their July 2013 arrests by SIGTARP and its law enforcement partners, the Illinois Attorney General charged the Esmails together with two former members of Premier’s board of directors, Robert McCarthy and William Brannin, alleging that from 2006 until the bank’s failure in 2012, the defendants hid the bank’s poor financial condition from state regulators. Zulfikar Esmail was also charged in 2013 as an organizer of financial crimes enterprise and with commercial bribery for engaging in a criminal shakedown scheme in which he allegedly solicited and demanded bribes from bank customers in connection with those customers’ applications to Premier Bank for business loans and lines of credit. Over the six-year period, the Esmails allegedly hid the bank’s rapidly declining financial condition from regulators by repeatedly submitting materially false financial reports to the Illinois Department of Financial Regulation. By late 2008, the bank was allegedly nearing failure and, in order to further the criminal scheme, it applied for – and received – the first of two payments of TARP funds. Among other means, it is alleged that to hide the true condition of the bank from regulators and Treasury, the defendants used money from (non-borrower) third parties to make payments on loans that were past due, including payments from a limited liability corporation owned in part by the Esmails’ children.

This case is being investigated by SIGTARP, the Office of the Attorney General for the State of Illinois, and the Office of the Inspector General of the Federal Deposit Insurance Corporation (“FDIC”).

On October 7, 2013, Salvatore J. Leone pled guilty in Federal court in Delaware to conspiracy to commit bank fraud for his role in a scheme to defraud Delaware-based TARP-recipient bank Wilmington Trust Company (“Wilmington Trust”). Wilmington Trust received $330 million in TARP funds in December 2008. At sentencing on February 13, 2014, Leone faces up to 30 years in Federal prison, a period of supervised release, and a fine.

Leone, a former project manager and partner in several limited liability companies formed for the purpose of developing real estate in and around Dover, Delaware, admitted that from approximately January 2007 through December 2009, he conspired with Michael A. Zimmerman to defraud Wilmington Trust by submitting fraudulent construction draw requests in order to obtain construction loan proceeds. During that time, Leone acted as project manager and partner with Zimmerman, a Delaware real estate developer. Leone admitted that he and Zimmerman obtained more than $37 million in financing from Wilmington Trust for three real estate development projects. Leone further admitted that he and his co-conspirators submitted to Wilmington Trust numerous fraudulent construction draw requests and requests for the advancement of funds. After the requested funds were disbursed, Leone and his co-conspirators used the funds for purposes other than requested, including for their own personal use.

Zimmerman, who was arrested on January 24, 2013, by SIGTARP agents and its law enforcement partners, has been charged in a separate indictment with conspiracy to commit bank fraud, eight counts of making a false statement to a financial institution, and two counts of money laundering. He is currently awaiting trial. Also as previously reported, Joseph Terranova, a former senior official at Wilmington Trust, pled guilty on May 8, 2013, to conspiracy to commit bank fraud for his role in a fraud scheme that concealed the true financial condition of Wilmington Trust by engaging in “extend and pretend” schemes to keep loans current and to hide past-due loans from regulators and investors. Terranova admitted to facilitating Zimmerman’s receipt of more than $2 million in proceeds that he was not entitled to under the terms of his loan agreement. Terranova concealed Wilmington Trust’s true financial condition by misrepresenting more than $883 million in loans that were past due in 2009. Terranova also took part in a mass extension of expired and matured loan commitments that resulted in a failure to report more than $373 million in past due loans.

The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the FBI, IRS-CI, and FRB OIG.

Brian D. Bailey, Head of Commercial Real Estate

On August 4, 2014, Brian D. Bailey, a Vice President and the former head of Delaware commercial real estate and Delaware market manager at TARP recipient Wilmington Trust Company (“Wilmington Trust”), pled guilty in the U.S. District Court for the District of Delaware to conspiracy to commit an offense against the United States (corruptly receiving gifts), as charged in a previously filed Indictment, and to a one-count felony information also charging him with conspiracy to commit an offense against the United States (causing a bank to make false entries in its books and records). Wilmington Trust received $330 million in TARP funds in December 2008 which remained outstanding until 2011 when Wilmington Trust was acquired by TARP recipient bank, M&T Bank Corporation (“M&T”). M&T itself also received more than $750 million in TARP funds in 2008.

According to the criminal information and plea agreement, from around March 2007 to around February 2010—both before and during the time Wilmington Trust held TARP funds—Bailey, who, as Wilmington Trust’s Delaware market manager, oversaw all lending in the state, conspired with Joseph Terranova (a former Wilmington Trust loan officer and Division Manager for Delaware Commercial Real Estate) and others in a massive “delay and pray” and “extend and pretend” scheme to hide from Federal bank examiners and the public hundreds of millions of dollars in non-performing, past due commercial real estate loans in order to conceal the bank’s true financial condition. Among other things, the conspiracy involved extending credit to keep existing loan interest payments current, thus causing the Bank to misrepresent its reporting of past due and nonperforming loans. These misrepresentations extended to, among others, the Federal Deposit Insurance Corporation, agents and examiners appointed to examine the bank, and the Board of Governors of the Federal Reserve System. The criminal conduct enabled Wilmington Trust to file false statements of condition, or “Call Reports,” with Federal financial regulators on a quarterly basis throughout 2009.

As described in the Information, each quarter in 2009, Wilmington Trust falsely underreported its past due and nonperforming loans, including by:

$186 million in the first quarter of 2009

$234 million in the second quarter of 2009

$463 million in the third quarter of 2009

$373 million in the fourth quarter of 2009

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation Division, and the Office of Inspector General for the Board of Governors of the Federal Reserve System. This prosecution was brought in coordination with the President Barack Obama’s Financial Fraud Enforcement Task Force.

Peter W. Hayes, Vice President

On November 13, 2014, Peter W. Hayes, a former loan officer and vice president at TARP recipient bank, Wilmington Trust Corporation (“Wilmington Trust” or the “Bank”), pled guilty in the U.S. District Court for the District of Delaware to one count of accepting a gift for procuring loans, in violation of 18 United States Code section 215. Wilmington Trust received $330 million in TARP funds in December 2008 which remained outstanding until 2011 when Wilmington Trust was acquired by TARP recipient bank, M&T Bank Corporation (“M&T”). M&T itself also received more than $750 million in TARP funds in 2008.

Hayes, of Newark, Delaware, admitted that, in November 2005, he purchased two model homes from a large Bank customer (the “customer”) as part of a sale/lease-back arrangement in which the customer agreed to pay Hayes and his business partner monthly lease payments in the exact amount of, and to satisfy, their monthly mortgage payments. In March 2008, Hayes and his partner sold the model homes to a third-party for a loss, leaving Hayes with a $70,000 obligation secured by his primary residence to his mortgage lender. Hayes ultimately requested a loan from the Wilmington Trust customer to cover the shortfall and, in November 2008, the customer loaned Hayes the necessary funds by issuing him a check from the customer’s operating account at Wilmington Trust. Hayes repaid the loan in February 2009 by depositing a cashier’s check directly into the customer’s WTC operating account, which he oversaw.

As part of his guilty plea, Hayes also admitted to making specific funding decisions for the customer that were based on materially false statements and omissions, or were otherwise in contravention of existing loan agreements. In all, during the four year period in which Hayes had a financial relationship with the customer, Hayes approved millions of dollars in financing for various real estate projects being developed by the customer.

On July 15, 2014, Hayes was indicted on seven counts including fraudulently benefitting in a loan transaction, bank bribery, and bank fraud. When sentenced, Hayes faces up to thirty years in federal prison followed by up to five years of supervised release.

With his guilty plea, Hayes becomes the third former Bank employee to be convicted of criminal conduct relating to employment at Wilmington Trust. This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the Federal Bureau of Investigation, and the Internal Revenue Service - Criminal Investigation. This prosecution was brought in coordination with the President Barack Obama’s Financial Fraud Enforcement Task Force.

Joseph Terranova, Vice President of Commercial Real Estate

On May 8, 2013, Joseph Terranova, a former senior official at Delaware-based Wilmington Trust Company (“Wilmington Trust”), pled guilty to conspiracy to commit bank fraud for his role in a fraud scheme that concealed the true financial condition of Wilmington Trust, a TARP-recipient bank, by engaging in extend and pretend schemes to keep loans current and to hide past-due loans from regulators and investors. Wilmington Trust received $330 million in TARP funds in December 2008. Terranova faces a maximum penalty of five years in Federal prison and a fine of up to $250,000 at sentencing.

Terranova was employed by Wilmington Trust as vice president and division manager of a commercial real estate division. Terranova admitted that he conspired with other bank employees to extend credit to bank customers with loan terms that were inconsistent with those approved by the Loan Committee. Terranova also admitted to taking part in a scheme that concealed Wilmington Trust’s true financial condition by misrepresenting over $883 million in loans that were past due in 2009. Terranova also took part in a mass extension of expired and matured loan commitments that resulted in a failure to report over $373 million in past due loans. Finally, Terranova admitted to entering into a Construction Loan Agreement with Delaware real estate developer Michael A. Zimmerman that was inconsistent with a budget originally approved by the Loan Committee. Terranova admitted to facilitating Zimmerman’s receipt of over $2 million in proceeds that he was not entitled to under the terms of the agreement.

The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the FBI, IRS-CI, and FRB OIG.

Michael A. Zimmerman, Real Estate Developer

On January 24, 2013, Michael A. Zimmerman, a Delaware real estate developer, was arrested by SIGTARP agents and its law enforcement partners in connection with his alleged role in defrauding Wilmington Trust Co. (“Wilmington Trust”), a TARP-recipient bank. Zimmerman was charged in Federal court with one count of conspiracy to commit bank fraud, seven counts of making a false statement to a financial institution, and one count of money laundering.

According to the indictment, Zimmerman allegedly defrauded Wilmington Trust by using real estate development loan proceeds for improper purposes, ultimately causing substantial losses to Wilmington Trust. The indictment alleges that from 2007 through 2009, Zimmerman obtained over $37 million in financing from Wilmington Trust for three real estate development projects. Subsequently, Zimmerman and his co-conspirators allegedly submitted to Wilmington Trust numerous fraudulent construction draw requests and requests for the advancement of funds. After the requested funds were disbursed, Zimmerman and his co-conspirators used the funds for purposes other than requested, including for their own personal use. For example, Zimmerman allegedly used loan proceeds to send money to himself and his partners and to personally invest in a development in the Bahamas. Wilmington Trust incurred a loss on the three projects in excess of $26 million.

If convicted of all nine counts, Zimmerman faces a maximum term of 250 years in prison, a fine, and restitution.

The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the FBI, IRS-CI, and the Office of the Inspector General-Board of Governors of the Federal Reserve System.

On December 9, 2014, Gilbert Lundstrom, the Chief Executive Officer of TARP applicant TierOne Bank, a publicly traded commercial bank formerly headquartered in Lincoln, Nebraska, was charged for his role in a scheme to defraud the bank’s shareholders and mislead regulators by concealing the true value of the bank’s loan and real estate portfolio. Additionally, on December 8, 2014, James A. Laphen, the former president and Chief Operating Officer of the bank pled guilty for his leading role in the scheme.

Specifically, in January 2009, after executing a supervisory agreement with OTS that required TierOne to report information about its performance and financial condition and to maintain a minimum capital position relative to its loan portfolio and other assets, Lundstrom and others allegedly used stale property appraisals and rejected new appraisals that would have required TierOne to write down the value of its real estate holdings. Additionally, Lundstrom and others allegedly delayed seeking new appraisals in order to conceal the depreciating value of the collateral securing the bank’s loans and also restructured loan terms to disguise troubled borrowers’ inability to make timely interest and principal payments. As a result, Lundstrom and others allegedly hid millions of dollars in losses from regulators and investors.

In 2008, TierOne submitted an application to the OTS seeking TARP funds. Ultimately TierOne withdrew its application and did not receive TARP funds. TierOne Corporation, the holding company for TierOne Bank filed for bankruptcy shortly after the bank was closed by OTS in June 2010.

James A. Laphen, President and Chief Operating Officer

On December 8, 2014, James A. Laphen, of Omaha, Nebraska, the former president and Chief Operating Officer of TierOne, pled guilty to conspiracy to commit securities fraud, wire fraud, making false entries in a bank’s books and records, as well as making false statements in a manner within the jurisdiction of the U.S. Government. Laphen is scheduled to be sentenced on February 27, 2015.

Don A. Langford, Senior Vice President and Chief Credit Officer

On September 9, 2014, Don A. Langford, a former Senior Vice President and Chief Credit Officer of TARP applicant TierOne Bank (“TierOne”), a publicly traded commercial bank formerly headquartered in Lincoln, Nebraska, pled guilty to conspiracy to commit securities fraud, wire fraud, making false entries in a bank’s books and records, as well as making false statements to a Federal Government agency, in connection with his role in a scheme to defraud TierOne’s shareholders and regulators. At sentencing, scheduled for December 5, 2014, Langford faces up to five years in Federal prison on each count.

According to the criminal information filed with Langford’s plea agreement, from at least 2009 to April 2010, in order to conceal TierOne’s true financial condition, Langford conspired with senior executives and other employees to falsely inflate the value of TierOne’s loan and real estate portfolio in reports to its regulators, including the U.S. Securities and Exchange Commission (“SEC”) and the Office of Thrift Supervision (“OTS”), as well as its outside auditors and the investing public. In January 2009, after executing a supervisory agreement with OTS that required TierOne to report information about its performance and financial condition and to maintain a minimum capital position relative to its loan portfolio and other assets, Langford and others intentionally misstated the value of TierOne’s real estate portfolio by using outdated appraisals on properties and rejecting new appraisals when those appraisals would have adversely impacted TierOne’s reportable assets, revenue, and earnings. Furthermore, Langford and others purposefully delayed seeking new appraisals so as to conceal the current value of the collateral, and also restructured loan terms to disguise borrowers’ inability to make interest and principal payments timely. As a result of these actions, Langford and his co-conspirators were able to hide millions of dollars in losses from investors and regulators, all the while continuing to enrich themselves through compensation and other benefits from TierOne.

This case is being investigated by SIGTARP, the Federal Bureau of Investigation, and the Department of Justice Criminal Division’s Fraud Section. The Securities and Exchange Commission also provided substantial assistance with the investigation. This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On February 5, 2015, Braxton L. Sadler, a former Senior Vice President and senior loan officer of TARP recipient bank TNBank, of Oak Ridge, Tennessee, was sentenced in the United States District Court for the Eastern District of Tennessee, in Knoxville, Tennessee, to two years probation following his August 2014 guilty plea to willfully misapplying bank funds in connection with a long-running scheme to defraud TNBank. Sadler was also ordered to pay restitution of approximately $963,900 to TNBank.

According to court documents, Sadler admitted that from 1995 through July 2009 he willfully processed loans for a borrower without investigating the borrower’s ability to repay the loan and then allowed the loan proceeds to be used for the borrower’s failed construction project, rather than for their stated purpose. In addition, Sadler lent personal funds to the borrower without disclosing these personal loans to TNBank or listing the loans on internal TNBank documents as debts the borrower owed and which impacted the borrower’s ability to repay the TNBank loans. Sadler also made payments with personal funds on several borrowers’ accounts, causing TNBank records to reflect that those customers were timely with payments when, in actuality, they were not. Finally, Sadler admitted that his actions resulted in misstatements on the bank’s application for TARP funds.

In December 2008, Tennessee Valley Financial Holdings, Inc., (“Tennessee Valley”) the parent company of TNBank, received $3 million in taxpayer funds through TARP. During the time TARP funds were outstanding, Tennessee Valley missed a total of thirteen required dividend payments, totaling $531,375.

This case is being investigated by SIGTARP and the Federal Bureau of Investigation and is being prosecuted by the United States Attorney’s Office for the Eastern District of Tennessee in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On January 16, 2015, the United States District Court for the Eastern District of Pennsylvania unsealed an indictment charging Brian Hartline, of Collegeville, Pennsylvania, and Barry Bekkedam, of Hobe Sound, Florida, in a fraud conspiracy involving TARP applicant, NOVA Bank, where Hartline was President and Chief Executive Officer and Bekkedam had served as Chairman.

According to the indictment, Hartline and Bekkedam devised the scheme in an attempt to defraud the government of more than $13 million through TARP. Each are charged with conspiracy to defraud the United States, TARP fraud, two counts of false statements to the federal government, and bank fraud. Bekkedam is charged with two additional counts of wire fraud.

Together with others, Bekkedam and Hartline formed NOVA Bank in 2002. Bekkedam also owned and operated a financial advisory company, Ballamor Capital Management, and allegedly advised Ballamor clients to invest in NOVA. In 2008, however, bad loans and investments placed NOVA at risk of failure and its investors were at risk of losing their investments. In October 2008, NOVA Financial Holdings, Inc., of Berwyn, Pennsylvania, the parent company of NOVA Bank, applied for approximately $13.5 million in TARP funds. Later, in June 2009, NOVA Bank was approved to receive the TARP funds contingent upon the bank raising $15 million in additional, private capital. The bank was ultimately unable to raise private capital, did not receive TARP funds, and, in October 2012, it failed and was closed by state and federal banking regulators.

According to the indictment, Bekkedam and Hartline devised a scheme in which NOVA would loan money to a Florida businessman, for the businessman to transfer to NOVA’s parent company so it would appear as though the bank had received new capital from an outside investor. On June 30, 2009, NOVA wired $5 million to the businessman’s bank account in Florida, and approximately two hours later, the businessman wired $5 million to an account used for investments in NOVA Financial Holdings, Inc. The indictment further alleges that, in October and December 2009, Bekkedam and Hartline convinced two others to make similar phony “investments” using loans from NOVA, in order to make NOVA appear more financially sound that it actually was. The defendants also allegedly told and directed employees to tell the Treasury Department that NOVA had raised new capital, when it, in fact, had not. The defendants are also accused of having concealed the true purpose of the loan to the Florida businessman and falsely stated the purposes of the two other loans.

If convicted of the most serious offense, each defendant faces up to 30 years in federal prison.

The case is being investigated by SIGTARP, the Federal Bureau of Investigation and the Pennsylvania Department of Banking and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On November 24, 2014, James A. Ladio, former founder, CEO, and president of MidCoast Community Bank (“MidCoast”), of Wilmington, Delaware, was sentenced by United States District Judge Richard G. Andrews to two years in federal prison followed by three years of supervised release, and was ordered to pay more than $700,000 in restitution to his victims for his role in a loan scheme involving TARP recipient Wilmington Trust Corporation (“Wilmington Trust”).

On December 17, 2013, Ladio pled guilty to two counts of bank fraud and two counts of money laundering relating to a nominee loan scheme in which, in October 2010 and July 2011, respectively, Ladio recruited two former MidCoast customers to obtain loans, the proceeds of which the customers loaned back to Ladio the same day.

According to court documents, Ladio also had been involved in a decade-long “loan-swap” arrangement with former Wilmington Trust Vice President and Delaware Market Manager, Brian Bailey, in which the two men provided more than 20 loans to each other totaling more than $1.5 million. Ladio engaged in the nominee loan scheme in substantial part to make interest and principal payments under a loan repayment agreement with Wilmington Trust.

Wilmington Trust received $330 million in TARP funds in December 2008 which remained outstanding until 2011 when Wilmington Trust was acquired by TARP recipient bank, M&T Bank Corporation.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the Office of Inspector General for the Board of Governors of the Federal Reserve System, and the Consumer Financial Protection Bureau.

On March 25, 2014, Darryl Layne Woods, the former chairman, president, and majority shareholder of Calvert Financial Corporation (“Calvert”), the bank holding company for Mainstreet Bank (“Mainstreet”), was sentenced to eight months detention in a halfway house followed by four months home detention for lying about the use of TARP funds. Woods, who was also the former chairman and chief financial officer of Mainstreet, was also ordered to pay $96,977 in restitution to Calvert and a $10,000 fine. Woods also agreed to a ban from any future involvement in any banking activities, including but not limited to serving as an officer, director, employee, or affiliated party of any financial institution or agency. In January 2009, Calvert received $1,037,000 through the TARP Capital Purchase Program.

On August 26, 2013, Woods pled guilty in U.S. District Court for the Western District of Missouri to misleading SIGTARP investigators about his use of TARP funds. On February 2, 2009, shortly after receiving $1,037,000 through the TARP Capital Purchase Program, Woods used $381,487 of the TARP funds received by Calvert to purchase a luxury seaside condominium in Fort Myers, Florida. In February 2009, as part of its oversight function, SIGTARP sent letters to various financial institutions seeking specific information about how TARP funds were used by each institution. As president of Calvert, Woods responded to SIGTARP’s Use of Funds Survey in a letter dated February 10, 2009, and did not disclose the purchase of the condominium, a material misrepresentation relating to the true use of the TARP funds.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Missouri, the Federal Bureau of Investigation, and Federal Reserve Board Office of Inspector General.

On March 31, 2014, Poppi Metaxas, former Chief Executive Officer and President of the California headquartered Gateway Bank, FSB (“Gateway”), was indicted for conspiracy to commit bank fraud, bank fraud, and perjury in the U.S. District Court for the Eastern District of New York. According to court documents, Metaxas is accused of engaging in a series of financial transactions to make it appear that Gateway took steps to improve its poor financial condition, when, in reality, those transactions defrauded Gateway, depleted its capital and placed the institution at financial risk. Metaxas surrendered to authorities on April 2, 2014.

In 2008, Gateway applied for TARP funds through the Capital Purchase Program, and, during that time, the Office of Thrift Supervision (“OTS”), Gateway’s banking regulator, instructed Gateway to improve the bank’s financial condition by increasing capital and reducing the number of problem/ non-performing assets. It was Metaxas’ responsibility to spearhead a plan to raise capital and ensure that a significant portion of problem assets would be sold. According to court filings, Metaxas, along with others, allegedly planned and executed a sham round-trip transaction that caused Gateway to use its own funds to subsidize a sale of Gateway’s nonperforming mortgage loans. Despite the defendant’s scheme to fraudulently improve Gateway’s financial condition, Gateway never received TARP funds.

In February and March 2009, Metaxas presented to Gateway’s board for its approval a proposal to sell problem assets. Three entities, Cooper Capital Group Ltd., Empower International, Inc., and The Steve Manna Group, LLC (“the Purchasers”) had purportedly agreed to purchase Gateway’s problem assets for approximately $15 million. The sale required the Purchasers to make a 25% down payment of the purchase price with Gateway financing the remaining 75% of the sale. Metaxas and her co-conspirators allegedly had devised a scheme in which Gateway would provide the buyers with the funds necessary to satisfy the 25% down payment. Metaxas allegedly recommended that the board approve the sale without disclosing the relationship and the financing arrangement among the co-conspirators. After the board approved the sale, Metaxas allegedly caused Gateway to extend a sham loan to Ideal Mortgage Bankers Ltd. d/b/a Lend America (“Lend America”), a mortgage lender and Gateway’s largest mortgage lending client, falsely claiming that the loan was to facilitate Lend America’s need for liquidity.

On March 30, 2009, Gateway transferred $3.64 million to Lend America. The funds were immediately transferred to Lend America’s payroll accounts, and then wired to the Purchasers’ accounts. The Purchasers turned around and used the funds to submit the required 25% down payment. It is alleged that Metaxas failed to disclose the true source of the down payment to the board and lied about the source of the down payment to the OTS when she testified during the formal exam process. The round-trip transaction resulted in significant losses for Gateway. In November 2009, Lend America ceased operations after receiving a court-ordered injunction that prevented it from making loans insured by the Federal Housing Administration. Gateway was forced to write off the entire loan to Lend America.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General.

On January 15, 2015, the United States District Court for the Eastern District of New York (Central Islip Division) unsealed plea proceedings in which Robert Savitsky, an attorney for mortgage origination company, Lend America, pled guilty to conspiracy to commit bank fraud for his role in defrauding TARP applicant, Gateway Bank FSB (“Gateway”). At sentencing, Savitsky faces up to five years in Federal prison. Additionally, on March 31, 2014, Poppi Metaxas, former President and Chief Executive Officer of Gateway, was charged in the United States District Court for the Eastern District of New York with conspiracy to commit bank fraud, bank fraud and perjury for her role in the scheme. Metaxas surrendered to authorities on April 2, 2014. Metaxas’ trial is scheduled to begin in June 2015, and, if convicted, she faces up to thirty years imprisonment on the bank fraud charge and up to five years on each the conspiracy and perjury charges.

According to court documents, Savitsky admitted that he, Metaxas, and others engaged in a series of financial transactions to make it appear that Gateway took steps to improve its poor financial condition, when, in reality, those transactions defrauded Gateway, depleted its capital and placed the institution at financial risk. In 2008, Gateway applied for TARP funds through the Capital Purchase Program, and, during that time, the Office of Thrift Supervision (“OTS”), Gateway’s banking regulator, instructed Gateway to improve the bank’s financial condition by increasing capital and reducing the number of problem and non-performing loans. Metaxas is alleged to have spearheaded and Savitsky admitted that he and others helped execute a plan to raise capital and ensure that a significant portion of problem assets would be sold. Specifically, Savitsky admitted that, together with others, he executed a sham round-trip transaction totaling more than $3.6 million that caused Gateway to use its own funds to subsidize a sale of Gateway’s nonperforming mortgage loans. Furthermore, Metaxas allegedly failed to disclose the true source of the funds to the OTS when she testified during a formal examination process. According to the Metaxas indictment, the round trip transaction resulted in significant losses to Gateway. In November 2009, Lend America ceased operations after receiving a court-ordered injunction that prevented it from making loans insured by the Federal Housing Administration and Gateway was required to write off the entire loan to Lend America.

In addition to Savitsky, three additional Lend America executives have pled guilty in the United States District Court for the Eastern District of New York to bank fraud for their roles in the scheme, including Lend America’s: President, Michael Primeau; Chief Operations Officer, Helene Decillis; and Chief Business Strategist, Michael Ashley. Each faces up to 30 years in Federal prison at sentencing.

This case is being investigated by SIGTARP, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General. The prosecution is being brought by the U.S. Attorney’s Office for the Eastern District of New York, in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On April 2, 2014, Gary Alan Rickenbach, the former Executive Vice President and Senior Executive Vice President of One Bank & Trust, N.A., (“Onebanc”) and One Financial Corporation, was indicted in the U.S. District Court for the Eastern District of Arkansas on one count each of conspiracy to commit bank fraud, misapplication of bank monies, making false entries to deceive bank regulators, obstructing a bank regulatory examination, and money laundering. One Financial Corporation, the bank holding company for Onebanc, received $17.3 million in TARP funds through the Capital Purchase Program in June 2009.

In April 2007, Rickenbach arranged for the approval of a $1.5 million line of credit for an associate without going through the formal process of Onebanc’s loan committee, according to court documents. The associate never paid back the line of credit, leaving the bank with at least a $1.5 million loss. Beginning in 2009, Rickenbach allegedly conspired with others to make fraudulent loans and lines of credit in an attempt to hide the loss from bank regulators. Rickenbach also allegedly misled certain members of Onebanc’s Board of Directors concerning the transactions and diverted funds that were due to the bank. He ultimately misapplied the funds as payment on the loans. If convicted of the most serious offense, conspiracy to commit money laundering, Rickenbach faces up to 20 years in Federal prison.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Arkansas, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, the Federal Reserve Board Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General.

Layton Stuart, Chief Executive Officer

On July 12, 2013, $17.9 million in life insurance benefits, several bank accounts, and five vehicles were seized in connection with a SIGTARP civil forfeiture investigation of Layton Stuart, the former CEO of One Bank & Trust of Little Rock, Arkansas (“One Bank”). Layton Stuart was the former owner of One Financial Corporation (“One Financial”), the holding company for One Bank. In October 2008, One Financial applied for $10 million in TARP funds. The request was later amended and increased to $17.3 million. In June 2009, One Financial received the requested $17.3 million in TARP funds. In September 2012, Stuart was officially terminated from functioning in any capacity at One Bank by its board of directors as a result of an order by the Office of the Comptroller of the Currency (“OCC”). Layton Stuart passed away on March 26, 2013.

The civil forfeiture complaint filed in Federal court in Little Rock, Arkansas, seeks the forfeiture of the proceeds of financial transactions in connection with a bank fraud and money laundering scheme allegedly committed by Stuart and others. The alleged scheme began in 2008 and ran until 2012 when Stuart was terminated as chief executive officer of One Bank. The complaint alleges that Stuart diverted almost $2 million of the TARP money for his personal use. Specifically, more than $1 million in TARP funds went to pay Federal and state taxes owed by Stuart. Stuart allegedly ensured the transactions would go undetected by disguising the payments as associated with a bank account known as the “Interdepartmental Account.” The remaining money was diverted into another bank account allegedly controlled by Stuart. The complaint was filed against the property, alleging that the assets were traceable as proceeds from the bank fraud and money laundering scheme.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Arkansas, the FBI, IRS-CI, and OCC.

Matthew D. Sweet, Vice President

On November 6, 2013, a former senior executive of One Bank & Trust N.A. (“Onebanc”) and a borrower were charged in Federal Court in Little Rock, Arkansas, in fraud schemes perpetrated against Onebanc. On January 7, 2015, Sweet pleaded guilty in the United States District Court for the Eastern District of Arkansas to one count of money laundering in connection with his scheme to defraud Onebanc.

OneFinancial Corporation (“One Financial”), the parent company of Onebanc, received $17.3 million in TARP funds in June 2009, which remains outstanding as of December 31, 2013.

According to court documents, Sweet was the vice president and controller of Onebanc until February 2012. While employed with Onebanc, Sweet obtained 30 cashier’s checks from January 2009 to October 2011 drawn on a Onebanc account by using his position as a senior executive to sign cashier’s checks. He would then mail the cashier’s checks to his two personal credit cards to pay off the credit card bills. In total, Sweet is alleged to have stolen almost $75,000. When confronted by Onebanc management, Sweet admitted his actions. He was allowed to resign and he paid back the amount he had stolen with two cashier’s checks from another bank. One check for $9,662.25 was made payable to Onebanc and one for $101,003.49 was made payable to Layton Stuart, former president and CEO of Onebanc.

On July 12, 2013, $17.9 million in life insurance benefits, several bank accounts, and five vehicles were seized in connection with a SIGTARP civil forfeiture investigation of Stuart, the former owner of One Financial. In September 2012, Stuart was officially terminated from functioning in any capacity at Onebanc by its board of directors as a result of an order by the Office of the Comptroller of the Currency. Stuart passed away on March 26, 2013. The civil forfeiture complaint filed in Federal court in Little Rock, Arkansas, seeks the forfeiture of the proceeds of financial transactions in connection with a bank fraud and money laundering scheme allegedly committed by Stuart and others. The alleged scheme began in 2008 and ran until 2012 when Stuart was terminated as CEO of Onebanc. The complaint alleges that Stuart diverted almost $2 million of the TARP money for his personal use. The civil forfeiture case is pending.

Alberto Solaroli, Borrower

Also on November 6, 2013, Onebanc customer Alberto Solaroli was charged with bank fraud for fraudulently obtaining funds from Onebanc. The charges alleged that Solaroli, purporting to be the owner of patents for certain technology, submitted falsified financial documents to Onebanc in order to obtain a $1.5 million loan. As part of the application process, Solaroli fraudulently claimed assets of $170 million and misrepresented his personal net worth to be more than $169 million. Solaroli allegedly used the funds for personal expenses and never made a single payment on the loan. In 2008, Onebanc sued Solaroli and received a civil judgment in Florida for $1.5 million, which Solaroli has not paid.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Arkansas, the FBI, IRS-CI, FRB OIG, and FDIC OIG.

Additional Defendants

On March 3, 2015, the United States District Court for the Eastern District of Arkansas unsealed an indictment charging four former senior executives of TARP recipient One Bank & Trust, N.A. (Onebanc), Tom Monroe Whitehead (former Chief Financial Officer); Michael Francis Heald (former Chief Operating Officer); Gary Alan Rickenbach (former Senior Executive Vice President); and Bradley Stephen Paul (former Executive Vice President) with conspiracy to commit bank fraud, misapplication of loan proceeds, making false entries in Onebanc’s books and records, making false statements to influence Onebanc, and obstructing a federal bank examination in connection with a long-running scheme to deceive Onebanc’s regulators. A trial is scheduled to begin on December 14, 2015, and, if convicted, each defendant faces up to thirty years in federal prison on the bank fraud, misapplication, and false entries counts; up to twenty years on the money laundering count and up to five years on the conspiracy count.

Specifically, the indictment alleges that, in April 2007, the defendants approved a $1.5 million personal line of credit to a borrower (“Borrower A”) which was due in one year. Borrower A, however, failed to make any payments on the loan and, by July 2008, Onebanc sued Borrower A and received a judgment against Borrower A. Rickenbach later made clear that it was “remote” Onebanc would “ever recover anything” from Borrower A. Nonetheless, from December 2007 through around September 2012, the defendants conspired to make loans to companies that were created in order to use the loan proceeds to make payments on Borrower A’s defaulted line of credit. Specifically, the defendants authorized Onebanc to make loans to two sham companies one of which was created at Rickenbach and Heald’s direction and the other which was created at the direction of, and for, the President of Onebanc. The Defendants also allegedly conspired to authorize a line of credit to a different Onebanc customer for the same purpose, i.e., to use loan proceeds to repay Onebanc for the defaulted line of credit made to Borrower A. Furthermore, the defendants allegedly undertook to prevent examiners from the FDIC and Office of the Comptroller of the Currency (“OCC”) from discovering these financial transactions. In the process, the defendants also allegedly misled the non-bank members of Onebanc’s Board of Directors, who owned shares in Onebanc’s parent company, about parts of the transactions and allegedly failed to report the past due status of Borrower A’s loan on a quarterly regulatory report filed with the FDIC. Ultimately, in September 2012, Rickenbach admitted to the Onebanc Board of Directors that “there [was] no doubt that my actions…[have] been devious and misleading” and acknowledging that the purpose of the loans was to “prevent the Bank from having to recognize a loss on [Borrower A’s] loan in January 2009.”

This case is being investigated by SIGTARP, the Internal Revenue Service - Criminal Investigation, the Federal Bureau of Investigation, the Federal Reserve Board Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General. The case is being prosecuted by the U.S. Attorney’s Office for the Eastern District of Arkansas, and is being brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On February 19, 2014, David Weimert was charged in the U.S. District Court for the Western District of Wisconsin with six counts of wire fraud for allegedly participating in a scheme to obtain money through fraudulent pretenses. Weimert was the Senior Vice President in Lending Administration at Anchor BanCorp Wisconsin, Inc. (“Anchor”) and the President of Investment Directions, Inc. (“IDI”), a wholly-owned subsidiary of Anchor. If convicted, Weimert faces a maximum of 30 years in Federal prison on each count. A trial date has yet to be set.

As alleged, from December 2008 through March 31, 2009, while serving in his positions at Anchor and IDI, Weimert misrepresented and omitted material information in order to obtain an ownership interest in a real estate partnership called Chandler Creek and to obtain a 4% commission fee in connection with the sale of Chandler Creek. Chandler Creek was a joint venture partnership formed with the Burke Real Estate Group (“The Burke Group”) to develop an industrial park in Round Rock, Texas. IDI and The Burke Group each owned a 50% interest in Chandler Creek. To further his fraud scheme, Weimert allegedly falsely represented in writing to the IDI Board of Directors that The Burke Group would buy IDI’s share of Chandler Creek contingent on Weimert purchasing a minority interest in Chandler Creek as part of the deal. Weimert failed to disclose that, in actuality, it was only Weimert who desired the minority interest for himself. As a result of his material misrepresentations, the IDI Board of Directors accepted The Burke Group’s offer to purchase Chandler Creek. As part of the purchase deal, Weimert was allegedly granted 4.785% ownership interest in Chandler Creek and was paid a 4% commission, totaling $311,000.

In January 2009, Anchor received $110 million in TARP funds. The U.S. Department of the Treasury has realized a loss of $104 million of its $110 million TARP principal investment in Anchor and has recouped the remaining $6 million pursuant to Anchor’s “pre-packaged” Chapter 11 bankruptcy reorganization.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Wisconsin, and the Federal Bureau of Investigation.

Dale Riggenberg

On August 14, 2013, Anchor BanCorp Wisconsin, Inc. (“Anchor”), and its former chief financial officer, Dale C. Ringgenberg, agreed to a settlement with the SEC on charges that Anchor and Ringgenberg intentionally or recklessly made material misstatements in Anchor’s quarterly report for the period ending on June 30, 2009, which was required to be filed with the SEC. Anchor received $110 million in TARP funds in October 2008.

The SEC’s complaint filed in Federal court in the District of Columbia alleged that Ringgenberg took, or failed to take, actions to keep from having to correct earnings that Anchor had already released to its shareholders. Ringgenberg manipulated an estimate to offset an accounting adjustment required by Anchor’s external auditors. He also refused or failed to properly account for real estate appraisals and related information that was available after the quarter closed but before Anchor filed its quarterly report. As part of the settlement, Ringgenberg is barred from serving as an officer or director of a public company for five years and will pay a civil penalty of $75,000. The settlement is subject to the approval of the court.

Treasury has realized a loss of $104 million of its $110 million TARP principal investment in Anchor and has recouped the remaining $6 million pursuant to a “pre-packaged” Chapter 11 bankruptcy reorganization that Anchor entered on August 13, 2013, and completed on September 27, 2013.

This case was investigated by SIGTARP, SEC, the U.S. Attorney’s for the Western District of Wisconsin, and the FBI.

On June 12, 2012, Jerry J. Williams, former president, chief executive officer, and board chairman of Orion Bank (“Orion Bank”) and its holding company, Orion Bancorp, Inc., was sentenced by the U.S. District Court for the Middle District of Florida to 72 months in Federal prison. On August 28, 2012, the same court ordered Williams to pay $31.05 million in restitution to FDIC (as receiver for Orion Bank). This restitution amount is in addition to the $5.76 million in restitution that the court previously ordered Williams to pay to victims. Orion Bancorp unsuccessfully sought $64 million in TARP funds in October 2008. Florida’s Office of Financial Regulation closed Orion Bank on November 13, 2009, and appointed FDIC as receiver. FDIC estimates that Orion Bank’s failure will cost the deposit insurance fund more than $600 million.

Williams had previously pled guilty to conspiracy to commit bank fraud and making false statements to Federal regulators arising from his participation in a bank fraud scheme involving Orion Bank. Williams admitted that, after Orion Bank failed to raise capital as instructed by Federal banking regulators, he conspired with two other Orion Bank executives, Thomas Hebble, former executive vice president, and Angel Guerzon, former senior vice president, and a former Orion Bank borrower, Francesco Mileto, to mislead state and Federal regulators into believing that Orion Bank was financially healthier than it truly was. Hebble, Guerzon, and Mileto pled guilty to their participation in the fraud and received prison sentences of 30 months, 24 months, and 65 months, respectively. Hebble and Guerzon were each ordered to pay $33.5 million in restitution to FDIC and Mileto was ordered to pay $65.2 million in restitution to FDIC ($33.5 million of which is to be paid jointly and severally with Guerzon and Hebble). The court also ordered Mileto to forfeit $2 million.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Florida, the FBI, IRS-CI, the Federal Reserve Board Office of Inspector General, and FDIC OIG.

On April 4, 2013, Reginald R. Harper, former chief executive officer, president and loan officer, of First Community Bank of Hammond, Louisiana (“First Community Bank”), was sentenced to serve 24 months in Federal prison followed by three years of supervised release and ordered to pay a fine of $25,000 for his role in a fraudulent scheme to conceal delinquent, non-performing loans by creating new sham loans at the bank. Additionally, FDIC issued a ban against Harper from working in the banking industry. On the same day, Troy A. Fouquet, a Louisiana real estate developer was sentenced to serve 18 months in Federal prison followed by three years of supervised release. Both Harper and Fouquet were ordered to pay $570,955, jointly and severally, in restitution to victims.

Previously, Harper and Fouquet each pled guilty to conspiracy to commit bank fraud in Federal court in New Orleans. As part of their fraudulent scheme, Harper arranged for First Community Bank to provide more than $2 million in loans to Fouquet in 2004 to purchase land and build houses on the land. However, they were unable to identify a sufficient number of qualified buyers for the houses. In response, Harper and Fouquet devised various cover-up schemes to avoid reporting the delinquent loans made by Harper to Fouquet. For example, they used “nominee” loans and “straw” borrowers to apply for new loans from First Community Bank, which Harper authorized, and then used the proceeds to pay off the original loans made to Fouquet. Harper and Fouquet’s misconduct caused First Community Bank to suffer large financial losses. As a result of their fraud, First Community Bank submitted a false “call report” (a report meant to disclose the bank’s true financial condition) to its regulator, which later affected the bank’s application for TARP funds. First Community Bank ultimately withdrew its TARP application, despite being approved to receive $3.3 million in TARP funds.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Louisiana, and the FBI.

On January 14, 2015, the United States Court for the Northern District of California unsealed an information and guilty plea in which James House, a businessman, admitted to one count of conspiracy to commit wire fraud, one count of bank fraud, one count of wire fraud affecting a financial institution, one count of conspiracy to make false statements to a federally insured bank, and one count of conspiracy to commit money laundering in connection with a three-year scheme to defraud TARP recipient Sonoma Valley Bank (“SVB”).

On March 18, 2014, in the United States District Court for the Northern District of California, two former SVB executives, Sean Cutting, the former President and CEO of SVB and Brian Melland, the former Chief Lending Officer of SVB, together with Bijan Madjlessi, a commercial real estate developer, and David Lonich, Madjlessi’s attorney and business partner, were each charged with money laundering, making false bank entries, wire fraud, conspiracy to commit wire and bank fraud, conspiracy to make false statements, conspiracy to commit money laundering, and bank fraud in connection with the scheme. Madjlessi and Lonich were also charged with obstructing the Federal Government’s investigation into the fraud scheme.

According to the plea agreement and other court documents, between March 2009 and November 2009, House admitted to working with the other defendants to defraud SVB by serving as a straw purchaser on a $9.5 million loan so that the funds could be used by Madjlessi to repurchase part of a condominium project for which Madjlessi had already defaulted on a construction loan. For their parts, Melland and Cutting are alleged to have authorized the fraudulent $9.5 million loan to the other two defendants by skirting the bank’s internal controls and while knowing House was serving as the straw buyer. Furthermore, in order to help Madjlessi regain control of residential units in the project that had already been sold, House once again agreed to serve as a straw buyer and made false statements to a contractor working on behalf of the Federal Deposit Insurance Corporation. Cutting allegedly produced letters, on SVB letterhead, falsely stating that straw buyers had sufficient funds at the bank to purchase the units so that the Madjlessi and Lonich could obtain financing from Freddie Mac. Earlier, in April and August 2007, House also agreed to act as a straw buyer for other real estate associated with Madjlessi, making false statements to the lenders Countrywide and TARP recipient Bank of America in the process.

In February 2009, Sonoma Valley Bancorp, SVB’s parent company, received approximately $8.7 million in TARP funds. On August 20, 2010, SVB was closed by the California Department of Financial Institutions, and taxpayers lost a total of $9 million from the principal TARP investment and missed dividend payments. When it failed, SVB had multiple outstanding loans to Madjlessi, and the FDIC estimated the cost of SVB’s failure to its deposit insurance fund to be $10.1 million.

At sentencing, House faces a maximum of 30 years in federal prison on the bank fraud, wire fraud, and conspiracy to commit wire fraud counts; five years imprisonment on the conspiracy to make false statements count; and 10 years imprisonment on the conspiracy to commit money laundering count.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Housing Financing Agency – Office of Inspector General, and the Federal Deposit Insurance Corporation – Office of Inspector General.

On March 13, 2015, Michael “Sean” Davis, of Crestview, Florida, pled guilty in the United States District Court for the Northern District of Florida to a total of nine counts including one count of conspiracy to commit bank and mail fraud; one count of conspiracy to commit money laundering; four counts of making false statements to a federally insured financial institution; two counts of fraudulently benefitting from a loan by a federally insured institution; and one count of money laundering in connection with a long-running short sale fraud scheme involving TARP recipient, Bank of America. Davis was indicted on October 21, 2014, in connection with the same conduct.

According to the plea agreement, beginning in January 2006, while the president of Premier Community Bank of the Emerald Coast (“Premier Community Bank”), Davis devised a scheme to defraud Premier Community Bank, Bank of America, and Beach Community Bank. As a part of the scheme, Davis solicited a straw buyer to submit false documents to purchase real properties via short sales from Bank of America. At Davis’ direction, the straw buyer then sold the properties the same day to third-party buyers. Davis authorized and approved loans from Premier Community Bank to these third-party buyers for the purchase of two of these properties from Davis’ straw buyer. As a result of these loans, Davis received more than $297,000 through his company, MSD Investments. Through this scheme, Davis discharged more than $743,000 in debt he owed to Bank of America for mortgage loans issued to Davis personally.

At sentencing, scheduled for May 28, 2015, Davis faces:

Up to 30 years in federal prison on each of the conspiracy to commit bank and mail fraud, false statement to a federally insured financial institution, and fraudulently benefitting from a loan by a federally insured institution counts

A maximum of 20 years imprisonment on the conspiracy to commit money laundering count

Up to 10 years imprisonment on the money laundering count.

In addition, Davis will be required to make full restitution to the victims that include, among others, Bank of America, and the FDIC as receiver of Premier Community Bank of the Emerald Coast.

The case is being investigated by SIGTARP, Internal Revenue Service – Criminal Investigation, the Federal Deposit Insurance Corporation Office of Inspector General and the Okaloosa County Sheriff’s Office as part of the Northwest Florida Financial Crimes Task Force. The case is being prosecuted by the United States Attorney’s Office for the Northern District of Florida in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On February 25, 2015, Chad Gettel, of Salt Lake City, Utah; John McCall, of Park City, Utah; Noemi Lozano (aka “Noemi Sayama”), of San Diego, California; Sheridan Black, of South Jordan, Utah; James Scott Creasey, of Riverton, Utah; and Jeremiah Barrett, of Bountiful, Utah, were charged in a forty-count indictment (unsealed on March 5, 2015) in the United States District Court for the District of Utah (Salt Lake City) alleging conspiracy, mail fraud, wire fraud, telemarketing fraud, conspiracy to commit money laundering, and money laundering in connection with a massive scheme to market and sell home loan modification services to distressed homeowners trying to save their homes from foreclosure following the financial crisis of 2008. The alleged scheme is believed to have involved more than 10,000 victims and spanned nearly every state in the country with losses totaling more than $33 million, and illegal profits were allegedly funneled through banks that received TARP funding, among others.

According to the indictment, the object of the conspiracy was for the defendants to market and sell loan modification services using false and fraudulent pretenses to obtain money from customers and to enrich themselves. Specifically, Gettel and Lozano started a loan modification business in July 2009 and set up CC Brown Law LLC (“CC Brown”) and other purported law firms, hiring attorneys to create the false impression that their loan modification business was a law firm. According to the indictment, however, CC Brown attorneys provided little to no actual legal services for individual customers, while misrepresenting to the public that attorneys were providing the core legal services for which the customers were paying. In fact, the indictment alleges, non-attorney “processors” and telemarketers working for them performed most, if not all, of the work for customers seeking loan modifications.

In August 2009, according to the indictment, Gettel obtained information about homeowners who were delinquent on their mortgage payments and hired third parties, including a telemarketing center in California, to market his loan modification business to these homeowners. Furthermore, the telemarketers pitched CC Brown using false and misleading statements provided them by Gettel, including statements that CC Brown had a 90 percent success rate in obtaining loan modifications; offered a money back guarantee in the event it could not obtain successful loan modification; and that CC Brown’s attorneys would provide the loan modification work.

Other misleading statements defendants caused telemarketers to make to customers included that: (i) loan modifications typically occurred in four months; (ii) the purported attorneys had over 100 years combined experience in real estate law; and (iii) they had obtained over 6,000 successful loan modifications and averaged 300-400 successful loan modifications per month. In purchasing the loan modification services, customers relied on these misleading and fraudulent statements. Gettel and McCall eventually instructed the telemarketers to sign up every potential customer who called regardless of whether the customer qualified for a home loan modification under the Treasury’s TARP-funded Home Affordable Modification Program, “HAMP,” or otherwise. Defendants also sent mass mailer solicitations to homeowners purporting to be pre-qualification notices for home loan modifications under government programs.

In around January 2010, Gettel hired McCall, and around April 2010, Gettel and McCall created in-house teams of telemarketers in Utah. Black and Barrett joined CC Brown Law to work in the Utah telemarketing center. Creasey joined CC Brown Law in early 2011. As alleged in the indictment, Black, Barrett, and Creasey eventually managed or supervised the Utah-based telemarketing operation. Complaints to state and federal agencies in Utah and other states reflected a pattern of fraudulent conduct. For instance, customers would go for months without knowing the status of their loan modification, and those who were already in default continued to receive letters and phone calls from the lender or debt collector. In some instances, customers lost their homes to foreclosure while still waiting for word on their loan modification from CC Brown.

The case is being investigated by SIGTARP, Internal Revenue Service - Criminal Investigation, the Federal Bureau of Investigation, the Office of Inspector General Board of Governors of the Federal Reserve System and Consumer Financial Protection Bureau, and the Federal Housing Finance Agency-Office of Inspector General. The case is being prosecuted by the United States Attorney’s Office for the District of Utah and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On August 5, 2014, executives Ped Abghari, a/k/a “Ted Allen,” and Dionysius Fiumano, a/k/a “D,” as well as attorney and co-conspirator, Justin Romano, Esq., were each charged in the United States District Court for the Southern District of New York with wire fraud and conspiracy to commit wire fraud, for engaging in a mortgage modification scheme that allegedly defrauded more than 8,000 homeowners in all 50 states out of over $18.5 million, in what is believed to be the largest mortgage modification scheme ever charged. On August 7, 2014, SIGTARP agents and their law enforcement partners arrested Abghari and Fiumano in Irvine, California, and, on the same day, Romano was arrested by SIGTARP agents and their law enforcement partners in Blue Point, N.Y.

According to the indictment, Abghari was a co-president and owner of an Irvine, California, company that offered purported mortgage modification services (the “Telemarketing Firm”) and Fiumano was a senior manager of the Telemarketing Firm directly responsible for training and overseeing its salespeople and telemarketers. Romano held himself out as the president of two purported law firms (the “Purported Law Firms”), based in Holbrook, New York, and Sayville, New York, respectively, which purportedly offered mortgage modification services in conjunction with the Telemarketing Firm.

From at least January 2011 through May 2014, Abghari, Fiumano and Romano, through the Telemarketing Firm and the Purported Law Firms, engaged in a massive scheme to defraud homeowners in dire financial straits who were seeking relief through the Home Affordable Modification Program (“HAMP”), a program created by the U.S. Treasury as a result of the financial crisis and collapse of the housing bubble in 2008, and other mortgage relief programs. HAMP, which was funded by TARP, permits qualified homeowners to obtain mortgage relief. Specifically, HAMP seeks to prevent foreclosure by modifying troubled loans to achieve monthly payments the homeowner can afford.

Any homeowner may apply for HAMP through his or her mortgage provider by completing a short form—readily available online as well as in many local banks—and submitting it, along with supporting paperwork, to the homeowner’s mortgage provider. Furthermore, submitting an application for HAMP is—by law—free of charge to the homeowner, and virtually all mortgage providers are required to participate in the HAMP program and accept HAMP applications. HAMP also sets guidelines for lenders to follow in determining eligibility, such as those based on the homeowner’s income and the principal balance remaining on the mortgage. Only a homeowner’s lender may determine the homeowner’s eligibility for a HAMP modification and, if appropriate, the homeowner’s modified interest rate and monthly mortgage payment.

Through a series of false and fraudulent representations, the defendants duped thousands of homeowners into paying thousands of dollars each in up-front fees in exchange for little or no service from the defendants or their companies. To perpetrate the scheme, Abghari and Fiumano, through the Telemarketing Firm, purchased thousands of “leads” consisting of the name, address, and other contact information of homeowners who had fallen behind in making home mortgage payments, and then caused the Telemarketing Firm to send false and fraudulent solicitation letters by e-mail to the homeowners. These solicitations misled the homeowners into believing that their mortgages were already under review for a HAMP mortgage modification and that new, modified rates had already been approved by the homeowners’ lenders. Additionally, at Abghari, Fiumano, and Romano’s direction, the sales staff called homeowners and/or answered homeowners’ telephone calls and, in an effort to convince the homeowners to pay up-front fees, the defendants regularly caused various false and fraudulent statements to be made to homeowners, including that:

The homeowners were retaining a “law firm” and an “attorney” who would complete the HAMP application and negotiate aggressively on the homeowners’ behalf with lenders.

The defendants would “pre-approve” the homeowners for a guaranteed modification through HAMP.

The defendants employed underwriters who would calculate and guarantee a new, modified rate and monthly mortgage payment.

The defendants’ mortgage modification services were free and the up-front fees would be paid directly to homeowners’ lenders.

In truth and in fact, however, and as Abghari, Fiumano, and Romano well knew, all of these representations were false and fraudulent. As the defendants knew, neither they nor any of their employees could pre-approve the homeowners or guarantee any of the homeowners a mortgage modification or new monthly payment. Moreover, defendants’ services were in no way free; instead, defendants kept all of the fees paid by homeowners and provided none of it to the homeowners’ lenders. Additionally, as the defendants knew, neither the Telemarketing Firm nor the Purported Law Firms provided homeowners with an attorney or any sort of legal assistance, and they frequently did little more than complete the Government-sponsored HAMP application which, as noted, the homeowners could have obtained and completed on their own, free of charge. In certain cases, as the volume of homeowners paying thousands of dollars to “retain” the defendants’ services swelled, the defendants and their employees did nothing at all in exchange for homeowners’ money.

Finally, as customer complaints mounted, Abghari, Fiumano, and Romano undertook to cover up their fraudulent scheme by changing the names of the Telemarketing Firm and Purported Law Firms. For instance, Abghari emailed employees of one of the Purported Law Firms and explained that “[t]he main reason we’re being slammed . . . is because we waited too long to change names. I normally change names every nine months to keep things cool and have all agencies off our backs. Within the next month or so you’ll see a major slow down on complaints because we no longer do business under [the name of the Purported Law Firm] or [the name of the Telemarketing Firm.]”

If convicted, the defendants each face up to 20 years in Federal prison for each of the counts.

This case is being investigated by SIGTARP and the U.S. Attorney’s Office for the Southern District of New York, and in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On November 6, 2013, Edward J. Woodard, Jr., the former chief executive officer, president, and chairman of the board at the Bank of the Commonwealth (“BOC”) was sentenced for his role in a $41 million bank fraud scheme that masked nonperforming assets at BOC and contributed to the failure of BOC in 2011. Woodard was sentenced to 23 years in Federal prison, followed by five years of supervised release. He was also ordered to jointly pay restitution of $333 million with other co-defendants and to forfeit $65 million as part of a joint order. In May 2013, after a 10-week trial, a jury convicted Woodard of conspiracy to commit bank fraud, false entry in a bank record, unlawful participation in loans, false statements to a financial institution, misapplication of bank funds, and bank fraud. The evidence presented at trial showed that Woodard engaged in an illegal relationship with certain favored borrowers to mask BOC’s deteriorating financial condition.

Also this quarter, on November 22, 2013, Jeremy C. Churchill, a former BOC vice president and commercial loan officer, was sentenced to five years of probation, which includes one year of home detention. Churchill was also ordered to pay $5 million in restitution and forfeiture, jointly with the other co-defendants. Churchill pled guilty in May 2012 to conspiracy to commit bank fraud. Churchill admitted that he submitted loan requests to BOC to provide more than $1 million to companies owned by Dwight A. Etheridge, a favored BOC borrower. BOC subsequently fully charged off the loans as a loss. Churchill also admitted to requesting that BOC provide a $4.1 million loan to Etheridge’s company to be used to purchase an incomplete condominium project in Virginia Beach from the owners who were delinquent on their loan at the bank. Churchill admitted that he and Stephen G. Fields, BOC’s former executive vice president and commercial loan officer, who was also convicted in the bank fraud scheme, used approximately half the loan proceeds to pay down the underlying loan on the property.

BOC was a community bank headquartered in Norfolk, Virginia, that failed in September 2011. It was the eighth largest bank failure in the country that year and the largest bank failure in Virginia since 2008. The Federal Deposit Insurance Corporation (“FDIC”) estimates that BOC’s failure will cost the deposit insurance fund more than $268 million. In November 2008, BOC sought $28 million in TARP funds. Subsequently, BOC’s Federal banking regulator asked the bank to withdraw the TARP application, which BOC did.

From 2005 to 2009, BOC more than doubled its assets, largely through brokered deposits, a financial tool that allows investors to pool their money and receive higher rates of returns. Because of the high volatility of these deposits, an institution must remain well-capitalized to accept and renew brokered deposits. BOC funded and administered many loans during this period without following industry standards or the bank’s own internal controls, and by 2008, the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 to 2011, BOC executives used various methods to fraudulently mask the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits. To fraudulently hide BOC’s troubled assets, the bank insiders overdrew demand deposit accounts to make loan payments, extended new loans or additional principal on existing loans to cover payment shortfalls, changed the terms of loan agreements to make loans appear current, and used funds from related entities (sometimes without authorization from the borrower) to make loan payments.

BOC funded and administered many loans during this period without following industry standards or the bank’s own internal controls, and by 2008, the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 to 2011, BOC executives used various methods to fraudulently mask the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits. To fraudulently hide BOC’s troubled assets, the bank insiders overdrew demand deposit accounts to make loan payments, extended new loans or additional principal on existing loans to cover payment shortfalls, changed the terms of loan agreements to make loans appear current, and used funds from related entities (sometimes without authorization from the borrower) to make loan payments.

In addition, the BOC executives hid millions of dollars of non-performing loans from the bank’s board of directors. The BOC executives also provided preferential treatment to troubled borrowers, including Etheridge and others, to purchase defaulted property. The borrowers were already having difficulty making payments on their existing loans and the financing allowed the borrowers to convert these non-earning assets into earning assets. In some instances, these new loans exceeded the purchase price of the property, which resulted in the borrowers obtaining cash at closing that they used to make payments on their other loans at the bank and for their own personal purposes. In addition, BOC executives caused the bank to fund loans to troubled borrowers to purchase or attempt to purchase properties owned by Edward Woodard and Troy Brandon Woodard. BOC subsequently charged off $9 million of these loans as a loss. In addition, Edward Woodard and Troy Brandon Woodard caused BOC to pay fraudulent invoices for construction costs for a bank branch when the true costs were incurred for renovations to Troy Brandon Woodard’s personal residence.

Eight other individuals have been convicted in connection with the investigation, six of whom have been sentenced to prison; one other individual’s charges are pending:

In addition to convicting Edward Woodard, the jury also convicted two other former top BOC bank executives and a favored borrower on conspiracy and fraud charges relating to their roles in the bank fraud scheme. Stephen Fields, the bank’s former executive vice president and commercial loan officer, was convicted of conspiracy to commit bank fraud, false entry in a bank record, false statement to a financial institution, and misapplication of bank funds. In September 2013, Fields was sentenced to 204 months in Federal prison, followed by five years of supervised release. He was also ordered to pay $332 million in restitution and forfeit $61.6 million, jointly with the other codefendants. Troy Brandon Woodard, the son of Woodard and the former vice president and mortgage loan specialist at a subsidiary of BOC, was convicted of conspiracy to commit bank fraud and unlawful participation in a loan. In September 2013, Troy Brandon Woodard was sentenced to 96 months in Federal prison followed by five years of supervised release. He was also ordered to pay $2.4 million in restitution and forfeit $4.3 million as part of the joint restitution and forfeiture orders. Dwight A. Etheridge, a favored BOC borrower who owned and operated a residential and commercial development company, was convicted of conspiracy to commit bank fraud, misapplication of bank funds, and false statement to a financial institution. In September 2013, Etheridge was sentenced to 50 months in Federal prison, followed by five years of supervised release. Etheridge was also ordered to pay $5 million in restitution and $11 million in forfeiture, jointly with the other co-defendants.

In July 2013, Thomas E. Arney, who pled guilty in the case, was sentenced to 27 months in Federal prison, followed by three years of supervised release. He was also ordered to pay $2 million in restitution as part of the joint restitution order and to forfeit $7.5 million, jointly with the other co-defendants, as well as a substantial amount of personal property and real estate. Arney was convicted of conspiracy to commit bank fraud, unlawful monetary transactions, and making false statements to a financial institution. Arney, a real estate developer and businessman, admitted performing favors for BOC insiders in exchange for preferential treatment that harmed the bank. Arney also admitted to helping these BOC insiders fraudulently conceal the extent of BOC’s non-performing assets by purchasing BOC-owned properties.

In July 2013, Recardo S. Lewis, a former vice president of Etheridge’s construction company, was sentenced to five years of probation, which includes six months home detention for his role in the fraud scheme. Lewis was also ordered to pay $855,962 in restitution as well as $2 million in forfeiture, as part of the joint restitution and forfeiture orders issued. Lewis previously pled guilty to conspiracy to defraud BOC by submitting fraudulent draws on the incomplete condominium project in Virginia Beach.

In September 2012 and October 2012, business partners Eric H. Menden and George P. Hranowskyj were sentenced to prison for their roles in the bank fraud scheme. Menden was sentenced to 11.5 years in prison followed by three years of supervised release. Hranowskyj was sentenced to 14 years in prison followed by three years of supervised release. Menden and Hranowskyj were ordered to pay $32.8 million in restitution and to forfeit $43.5 million as part of the joint restitution and forfeiture orders. On January 25, 2012, Natallia Green, a former employee of Menden and Hranowskyj, was sentenced to five years of probation and was ordered to pay $106,519 in restitution after pleading guilty to making a false statement to BOC in a loan application. On August 10, 2011, Maria Pukhova, another former employee of Menden and Hranowskyj, was charged with making a false statement on a loan application to BOC in April 2010. Pukhova’s case is pending.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Virginia, the Federal Bureau of Investigation (“FBI”), Internal Revenue Service Criminal Investigation (“IRS-CI”), the Securities and Exchange Commission (“SEC”), the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”) and the Office of Inspector General – Board of Governors of the Federal Reserve System (“FRB OIG”).

Two former officers at American Mortgage Specialists (“AMS”) were sentenced to Federal prison for their roles in a fraud scheme that defrauded TARP-recipient BNC National Bank (“BNC”) of approximately $28 million. On July 1, 2013, David E. McMaster, vice president of lending operations of AMS, was sentenced to 188 months in Federal prison followed by five years of supervised release. On June 28, 2013, Scott N. Powers, the former chief executive officer and president of AMS, was sentenced to 96 months in Federal prison followed by five years of supervised release. Restitution and forfeiture in the amount of $28.6 million was ordered against McMaster and Powers. McMaster was also ordered to forfeit his interest in several automobiles, including a 2010 Mercedes-Benz and a 2005 Hummer H2 SUV, and the proceeds held in two personal bank accounts. On May 6, 2013, Lauretta Horton, the former director of accounting for AMS, and David Kaufman, an outside auditor, were also sentenced to 24 months probation each.

McMaster and Powers each pled guilty in October 2012 to conspiracy to commit bank fraud and wire fraud. In November 2012, Horton pled guilty to conspiracy to commit bank fraud and wire fraud and Kaufman pled guilty to obstructing the Government’s investigation into the fraud perpetrated against BNC.

AMS was an Arizona company that originated residential mortgage loans and sold the loans to institutional investors. AMS obtained funding for these loans by selling participation interests in the loans to financial institutions, including BNC. BNC’s holding company received approximately $20 million in TARP funds in January 2009, and the holding company subsequently injected $18 million of the TARP funds into BNC. BNC incurred approximately $28 million in losses as a result of the fraud, which exceeded the amount of TARP funds received by BNC. In addition, BNC has failed to make any of its required TARP dividend payments to the U.S. Department of Treasury (“Treasury”).

BNC entered into a loan participation agreement with AMS in 2006 to provide funding for loans originated by AMS. Under the agreement, when AMS loans were subsequently sold to investors, AMS was required to send “pay down” emails to BNC notifying the bank of the sales and to repay BNC for the funds the bank provided for the loans sold. BNC used the “pay down” information to monitor which loans had and had not been sold to investors. AMS was also required to repurchase any loans funded by BNC if the loans were not sold by the loan maturity date.

McMaster and Powers admitted to devising and executing a scheme to defraud BNC of the funds provided to AMS for loan origination purposes. AMS began to experience cash shortages in October 2007. Powers and McMaster admitted that without additional funding from BNC, AMS would have been forced to terminate its operations. To enable AMS to continue receiving funding from BNC, Powers and McMaster submitted false loan “pay down” information to BNC. In particular, Powers and McMaster orchestrated a “lapping” scheme by causing employees to delay notification to BNC of loan sales in order to use funding provided by BNC for new loans to repay BNC for loans sold earlier. In addition, Powers, McMaster, and Horton provided BNC materially false information about AMS’s operations and financial condition, including failing to disclose that AMS was suffering a cash shortage and was making payments to the IRS for back payroll taxes. As part of the scheme, McMaster and Horton submitted false financial statements that disguised the IRS payments under “marketing” and “advertising” expenses as well as inflating current cash amounts. Powers and McMaster also used BNC funds to (i) pay for the operations of AMS, (ii) provide hundreds of thousands of dollars in personal benefits to themselves in the form of salary, bonuses, and payment of personal expenses, and (iii) make hundreds of thousands of dollars of personal loans to themselves that were paid off using additional funds diverted from BNC.

Kaufman, a certified public accountant, falsified AMS’s audited financial statements to prevent BNC from discovering the true extent of AMS’s tax liabilities and terminating its relationship with AMS. Kaufman also lied to Federal agents of SIGTARP and the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”) and to Federal prosecutors regarding his falsification of AMS’s financial statements.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of North Dakota, and FHFA OIG.

On October 23, 2013, Guy Samuel, Anthony Blackwell, Angel Gonzalez, Aren Goldfaden, and Jonathan Lyons were charged with allegedly operating a large mortgage modification scheme that defrauded hundreds of victims out of millions of dollars. All five defendants were charged with conspiracy and wire fraud. Also, on October 16, 2013, Scott Schreiber pled guilty to conspiracy to commit wire fraud and wire fraud and on September 19, 2013, Darrell Keys pled guilty to conspiracy to commit wire fraud in connection with their roles in the scheme. Sentencing for Keys is scheduled for March 19, 2014, while Schreiber is scheduled to be sentenced on April 17, 2014.

Between January 2009 and June 2011, the defendants operated several companies that allegedly falsely promised to help financially struggling homeowners refinance their mortgages for lower interest rates and monthly payments after the homeowners paid upfront fees of thousands of dollars. The defendants allegedly enticed homeowners to participate in a fraudulent loan modification program by making numerous false misrepresentations to homeowners through advertisements, websites, promotional letters, and direct conversations. The alleged misrepresentations included: (i) the defendants’ companies were associated with HAMP; (ii) a mortgage modification was guaranteed and would only take 30 to 60 days; (iii) mortgage payments submitted to the defendants could “assist” with the modification approval process; and (iv) homeowners would be refunded their paid fees if the defendants could not modify a homeowner’s loan. The defendants are also accused of altering customer financial information used by an online service to determine eligibility for HAMP modifications. This caused false modification approvals to be generated, lulling customers into believing work was actually being done on their behalf. Customers who received the deceptive modification approvals erroneously believed that they were eligible for a modification. After receiving the upfront fees from the struggling homeowners, the defendants allegedly did nothing and used the funds for their own personal use. Through the scheme, the charges allege that the defendants’ companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, and the FBI.

On March 23, 2015, Brian W. Harrison, of Great Bend, Kansas, a former vice president and loan officer at TARP recipient Farmers Bank and Trust (“Farmers Bank”), also of Great Bend, pled guilty in the United States District Court for the District of Kansas to one count of bank fraud in connection with his long-running scheme to defraud Farmers Bank by hiding the performance of various loans he made. Harrison was arrested by law enforcement in January 2015, having been indicted in November 2014.

According to court documents, Harrison’s duties included reviewing, approving and disbursing loans within his lending authority without the approval of the bank’s loan committee. In furtherance of his scheme to defraud the bank, from around 2005 to 2012, Harrison made (or caused to be made) false statements designed to hide the poor performance of a number of loans he made. Harrison’s false statements were intended to deflect questions from the bank about problems with the loans. Additionally, he falsified credit and loan applications, promissory notes and security agreements on behalf of a purported debtor without the debtor’s proper authority.

At sentencing, which is set for June 8, 2015, the parties have agreed to recommend a sentence of six months in prison, followed by six months home detention, as well as an order requiring Harrison to pay more than $124,000 in restitution.

Farmers Enterprises, Inc. (“Farmers Enterprises”), of Great Bend, Kansas, the parent company for Farmers Bank, received $12 million in TARP funds in June 2009. In November 2012, Farmers Enterprises exited TARP by partially repaying the U.S. Treasury to redeem the original TARP funding. The bank’s repurchase of the shares at a discount resulted in a principal loss of approximately $560,000 on the TARP investment.

This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

Michael W. Yancey, Senior Vice President

On June 25, 2014, Michael W. Yancey, former Senior Vice President and loan officer of Farmers Bank & Trust, N.A. (“Farmers”) pled guilty in the U.S. District Court for the District of Kansas to one count of conspiracy to make a false statement on a loan application. At sentencing, Yancey faces up to five years imprisonment. Farmers Enterprises, Inc. (“Farmers Enterprises”), the holding company for Farmers, received $12 million in TARP funds in June 2009. In November 2012, Farmers Enterprises partially repaid the U.S. Treasury to redeem the original TARP funding, resulting in a shortfall of more than $500,000.

According to court documents, beginning in March 2007, Yancey conspired with a borrower to obtain an $825,000 commercial loan from Farmers for the purchase of real estate in Basehor, Kansas. As part of the borrower’s loan application, Yancey accepted a contract for the purchase of the underlying property falsely stating that the purchase price for the property was $1.1 million, when, as Yancey knew, the actual purchase price was $850,000. Yancey and the borrower claimed that the purchase price was $1.1 million in order to make it appear that the borrower had injected more equity so that the loan would conform to a maximum 75 percent loan-to-value ratio and would be approved by the bank’s loan committee. In reality, however, the $825,000 loan from Farmers accounted for around 97 percent of the actual $850,000 purchase price.

Additionally, according to court documents, Yancey created a fictitious loan application which he submitted to the Farmers’ loan committee for approval, including the fake purchase price information and false statements that the loan involved an equity injection of $125,000 from the borrower and a $150,000 seller carryback amount. In each of the following three years, through 2010, Yancey recommended the renewal of the loan without correcting the false statements contained in the file.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Kansas, the Federal Bureau of Investigation, and the U.S. Department of Labor Office of Inspector General and Employee Benefits Security Administration.

On July 7, 2014 Paul Ryan, a loan officer at TARP-recipient Broadway Federal Bank (“Broadway Federal”) pled guilty to one count of bank bribery in the U.S. District Court for the Central District of California for demanding and accepting more than $350,000 in illicit payments from brokers in connection with his review of various churches’ loan applications. At sentencing, Ryan faces a maximum of 30 years in Federal prison.

According to the plea agreement, between February 2007 and March 2010, Ryan served as Broadway Federal’s loan officer for applications submitted on behalf of numerous churches, predominantly African-American congregations, in the Los Angeles area. Broadway Federal would pay rebates to brokers who brought such loans to the bank and, unbeknownst to Broadway Federal, Ryan abused his position of trust by demanding and accepting the rebate payments from brokers for himself and receiving a kickback to a company he controlled. Ryan also conceded that the rebates and kickback influenced his processing of the churches’ loan applications, which he accepted knowing the financial information had been inflated. In addition, Ryan admitted that he tried to obstruct the investigation into the bribes by telling another individual to lie about the reason the individual provided money to Ryan. As a result of the scheme, Broadway Federal suffered significant losses on loans processed and approved by Ryan.

In November 2008, Broadway Financial Corporation, the holding company for Broadway Federal, received $9 million in TARP funds, and, in December 2009, it received another $6 million. As of June 30, 2014, the entire $15 million remained outstanding.

This case is being investigated by SIGTARP, the United States Attorney’s Office for the Central District of California, the Internal Revenue Service – Criminal Investigation, Federal Deposit Insurance Corporation Office of the Inspector General, and the Federal Bureau of Investigation.

On August 4, 2014, Timothy P. Fitzgerald, a former Chief Financial Officer of KC United, LLC, (“KC United”), a holding company for five construction services companies in Kansas City, Kansas, pled guilty in U.S. District Court for the District of Kansas to one count of conspiracy to commit bank fraud for his scheme to defraud TARP recipient Bank of Blue Valley (“Blue Valley”) of Overland Park, Kansas. In addition, on September 3, 2014, K. Kevin James and his son, Charlie M. James, owners of KC United, were indicted in the U.S. District Court for the District of Kansas. Specifically, Kevin James was indicted on ten counts of bank fraud, eight counts of wire fraud, and one count of conspiracy to defraud the United States, in connection with his roles in the scheme to defraud Blue Valley, while Charlie James was charged with four counts of wire fraud, one count of conspiracy to defraud the United States, three counts of tax evasion, and one count of bankruptcy fraud. The indictment also alleges that Kevin and Charlie James diverted prevailing wage fringe benefits owed to employees of their construction companies for other purposes, including personal use and also conspired to evade paying Federal employment taxes.

According to his plea agreement, Fitzgerald admitted—and the indictment against Kevin James alleges—that Kevin James and Fitzgerald obtained business loans from Blue Valley by hiding and falsely representing the failing financial condition of KC United, resulting in a loss to the former TARP bank of more than $875,000. More specifically, Fitzgerald admitted—and the indictment against Kevin James alleges—that:

Kevin James directed Fitzgerald to manipulate the company’s books and records in order to get more money from Blue Valley. On ten occasions from 2008 to 2011, knowing that KC United was losing money and that it needed to show a profit in order to get more money from Blue Valley, Kevin James instructed Fitzgerald to manipulate KC United’s quarterly financial statements to hide KC United’s operating losses and falsely reflect a profit. Relying on the false information, Blue Valley increased KC United’s line of credit to $2.8 million and renewed more than $1 million in outstanding loans.

In December 2008, knowing that its outside accounting firm would easily discover the alterations that had been made to the quarterly financial statements, Fitzgerald and Kevin James agreed that Fitzgerald would prepare an annual financial statement incorporating the false quarterly profits, as well as a fake cover letter on the outside accounting firm’s letterhead, later delivered to Blue Valley, stating, unbeknownst to the accounting firm, that the accounting firm had reviewed the financial statement.

Also in December 2008, Blue Valley Bank Corp., the holding company for Blue Valley, received approximately $21.8 million in TARP funds. As noted above, the scheme continued; ultimately, in April 2011, three KC United companies filed for bankruptcy and in March 2012, Blue Valley sold the remaining outstanding KC United loan, suffering a loss of more than $875,000. During the time it held TARP funds, Blue Valley failed to make 18 required quarterly dividend payments to the U.S. Treasury, totaling over $4.8 million, and, in October 2013, Treasury sold its stake in the bank at auction and suffered a principal loss of more than $485,000.

At sentencing, Fitzgerald faces up to 30 years in Federal prison. If convicted, Kevin James faces a maximum penalty of 30 years in Federal prison on each bank fraud count; both defendants face up to 20 years on each wire fraud count, a maximum penalty of five years for each count to conspire to defraud the United States and Charlie James faces a maximum penalty of five years for each tax evasion count, and a maximum penalty of five years for each bankruptcy fraud count.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Kansas, the Internal Revenue Service Criminal Investigation Division, the U.S. Department of Labor – Office of the Inspector General, and the U.S. Department of Labor Employee Benefits Security Administration. This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On December 11, 2012, at SIGTARP’s request, Treasury issued a one-year suspension against Avondale Investments, LLC (“Avondale”) and its president and sole owner, Donald Dillingham, from participating in Federal Government programs and activities.

In November 2008, Avondale submitted to Treasury an application to perform asset management services to Treasury, including the ongoing valuation of securities issued to Treasury by certain banks participating in the Capital Purchase Program. Treasury limited these asset manager assignments to companies that manage at least $100 million in assets. In its application to Treasury, Avondale claimed to have $101 million in assets under management. After reviewing Avondale’s application, Treasury selected Avondale as an asset manager and Avondale began providing advisory services to Treasury in December 2009. Treasury later discovered that Avondale had falsely inflated the amount of its assets under management in its application to Treasury and had only about $47 million in assets under management at the time that the application was filed. Treasury terminated Avondale as an asset manager in May 2011. Specifically, the suspension precludes Avondale and Dillingham from participating in transactions with the U.S. Government, including grants, loans, and loan guarantees, and from acting as a principal of an organization participating in such transactions.

On February 12, 2015, Gary Patton Hall, Jr., of Tifton, Georgia, a former President and Chief Executive Officer (“CEO”) of TARP recipient Tifton Banking Company (“TBC”), was charged with six counts of bank fraud and one count of TARP fraud in the United States District Court for the Middle District of Georgia for his role in a scheme to hide underperforming and at-risk loans from the bank and the Federal Deposit Insurance Corporation (“FDIC”), among others.

According to the indictment, Hall, who was TBC’s President and CEO from August 2005 until June 2010, engaged in a long-running scheme to mislead the bank and its loan committee about loans TBC made to local individuals and businesses. As part of the scheme, Hall allegedly hid past due loans from the FDIC and the TBC loan committee which resulted in the bank continuing to approve and renew delinquent loans and loans where were lacking collateral. Several of the borrowers eventually defaulted on the loans, resulting in millions of dollars of losses to TBC and others.

In addition, Hall also allegedly hid his personal and business interest in at least two of the transactions over which he exercised his approval authority. For instance, in one case, Hall allegedly approved several loans to the buyer of his condominium in Panama City Beach, Florida, providing 100 percent financing. In doing so, Hall also is alleged to have made several false representations about the loans to the TBC loan committee, and he failed to disclose his personal interest in the transaction. When the buyer’s loan payments became delinquent, Hall allegedly hid the loan from both the FDIC and state banking regulators. Hall furthermore allegedly received $50,000 from the sale of his condominium in this transaction, which was funded in full by an unsecured loan to the buyer approved by Hall. Eventually the buyer declared bankruptcy, resulting in a loss of over $400,000 to TBC.

In November 2010, the Georgia Department of Banking and Finance closed TBC as a result of its poor financial condition, and, at that time, TBC had not repaid the $3.8 million of TARP funds it had received, nor a missed dividend payment.

If convicted, Hall faces up to thirty years in Federal prison for each of the bank fraud counts and ten years in Federal prison for the TARP fraud count. The case is being investigated by SIGTARP, the Federal Bureau of Investigation and the Small Business Administration’s Office of the Inspector General, the Federal Deposit Insurance Corporation’s Office of the Inspector General, the Department of Agriculture’s Office of Inspector General and the Tifton County Sheriff’s Office.

On January 13, 2015, Carlos Novelli, of Vero Beach, Florida, former Chief Operations Officer for Oxford Collection Agency, Inc. (“Oxford”), was sentenced in the United States District Court for the District of Connecticut in Bridgeport, Connecticut, to two years of probation and ordered to pay more than $1.7 million in restitution to his victims, which included TARP recipient banks, having pled guilty in December 2012 to conspiracy to commit wire fraud and bank bribery stemming from a $10 million fraud scheme. Additionally, Novelli’s co-defendants, Randall Silver, Oxford’s former Vice President of Finance and Chief Financial Officer, of New Hyde Park, New York, and Charles Harris, an Oxford Executive Vice President, of Babylon, New York, each pled guilty in December 2012 for their roles in the scheme. Silver, who pled guilty to one count of conspiracy to commit wire and bank bribery and one count of wire fraud unrelated to the conspiracy offenses, was sentenced in October 2014, to five years probation. Harris pled guilty to one count of conspiracy to commit wire fraud and bank bribery and was sentenced to four years probation. Both Silver and Harris were also ordered to pay restitution of $10,401,227, joint and several, to the victims, which included TARP recipient banks.

According to court documents, various businesses and other entities contracted with Oxford to collect debts owed them by consumers. Oxford collected debts from consumers under the pretense that it would report all such collections to its clients and remit the appropriate amount to the client. However, Silver, Harris, Novelli, and other Oxford executives routinely caused Oxford to collect debts that were never remitted to its clients and referred to these unremitted collections as a client’s “backlog.” To hide the backlog, Silver, Harris, Novelli and others would make periodic fraudulent collection reports to certain clients that under-reported the amount of funds collected.

Michael Gesimondo, Washington Mutual Collections Manager

On January 10, 2014, in U.S. District Court for the District of Connecticut, Michael Gesimondo pled guilty to taking kickbacks while he was a collections manager at Washington Mutual Bank (“Washington Mutual”). On September 25, 2008, Washington Mutual was closed by Federal regulators, and its banking operations were sold to JPMorgan Chase & Co. in a transaction facilitated by regulators. On October 28, 2008, JPMorgan Chase & Co. received $25 billion in TARP. The TARP funds were repaid in full on June 17, 2009. According to court documents Gesimondo was in charge of outsourcing collection accounts to collection agencies. Washington Mutual had a contract with Oxford Collection Agency (“Oxford”) to collect debts owed by its consumers. Gesimondo admitted that, from May 2008 through May 2009, he received kickbacks as reward for providing Oxford with Washington Mutual’s debt collection business.

Wilbur Tate III, U.S. Bank Assistant Vice President

On November 22, 2013, Wilbur Tate III pled guilty in Federal court in Bridgeport, Connecticut, to receiving bribes while he was employed as an assistant vice president with TARP recipient U.S. Bank. At sentencing on February 14, 2014, Tate faces up to five years in prison, a period of supervised release, and a fine. As previously reported, on February 27, 2013, Tate was arrested by SIGTARP agents and its law enforcement partners and charged with taking bribes from executives at the debt collection agency Oxford Collection Agency (“Oxford”).

From January 2004 through February 2011, Tate was responsible for outsourcing collection accounts to collection agencies, including Oxford. Tate admitted that, from August 2008 through November 2010, he accepted bribes from several executives at Oxford in exchange for steering bank business to Oxford. Tate took bribes that began with boxes of expensive cigars and escalated to cash payments of as much as $5,000 that were hidden in cigar boxes.

Other Defendants

On December 19, 2013, Peter Pinto, the former chief executive officer at Oxford, was sentenced to 48 months in Federal prison, followed by five years of supervised release. Restitution will be determined by the court at a later date. Peter Pinto and his father, Richard Pinto, each had previously pled guilty in May 2012 to one count of conspiracy to commit wire fraud, substantive wire fraud, bank fraud, and money laundering stemming from a $10 million fraud scheme they executed while executives at Oxford. On January 30, 2013, Richard Pinto, the now-deceased former chairman of Oxford, was sentenced to 60 months in Federal prison and was ordered to pay $12.3 million in restitution.

On September 9, 2013, Patrick Pinto, a former vice president at Oxford, was sentenced to two years of probation accompanied by six months of home confinement and a $10,000 fine for his role in the fraud scheme perpetrated through Oxford. Three other former Oxford senior executives pled guilty in December 2012 for their roles in the scheme: Randall Silver, chief financial officer, Charles Harris, executive vice president, and Carlos Novelli, chief operations officer. At sentencing, Silver faces up to 25 years in prison and a fine; Harris and Novelli each face up to five years in prison and a fine.

From January 2007 through March 2011, Oxford had agreements with business clients to collect debts from debtors, to report such collections to the clients, and to remit the collected payments back to the clients. The clients would pay Oxford a portion of the monies collected by Oxford as a fee. Silver, Harris, and Novelli admitted to conspiring with Richard Pinto and Peter Pinto to execute a fraud scheme in which they (i) collected funds from debtors on behalf of clients but did not remit those funds to the clients and (ii) created false documents and used other deceptive means to cover up their failure to remit collected funds to clients and their improper use of the funds. Richard Pinto and Peter Pinto also admitted to causing Oxford to secure a line of credit from TARP recipient Webster Bank without disclosing to the bank that Oxford was defrauding its clients and had significant outstanding payroll taxes. Silver also helped Richard Pinto and Peter Pinto defraud Webster Bank by inducing the bank to increase the line of credit to $6 million by withholding Oxford’s true financial condition and submitting falsified financial records to the bank. Richard Pinto, Peter Pinto, and Silver also admitted to laundering funds from the line of credit by providing those funds to clients to maintain the clients’ business, which continued the scheme. The fraudulent scheme led victims to lose more than $12 million.

The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, and the Connecticut Securities, Commodities and Investor Fraud Task Force.

On March 25, 2015, Candice L. White of Centennial, Colorado, a former Senior Vice President of TARP recipient Front Range Bank, also of Centennial, Colorado, was arrested by law enforcement after having been indicted on March 24, 2015, in the United States District Court for the District of Colorado, on thirty-seven felony counts of embezzlement and willful misapplication of funds from a federally insured bank.

According to the indictment, from July 2009 through March 2011, White allegedly embezzled more than $92,000 from the bank for her own personal use and for the use of others. In addition, White is charged with willfully misapplying additional funds from other client accounts to an escrow account from which White embezzled the majority of the $92,000 in order to conceal and facilitate her ongoing criminal activity.

A trial is set for June 1, 2015. If convicted, White faces a maximum of thirty years in federal prison for each count. White was also charged with two misdemeanor counts of embezzlement and willful misapplication of funds from a federally insured bank, and, if convicted on those counts, she faces up to one year in federal prison.

Omega Capital Corporation (“Omega”), of Centennial, Colorado, the holding company for Front Range Bank, received $2,816,000 in TARP funds in April 2009. During its time in TARP, Omega missed fifteen dividend payments totaling more than $575,000 owed to Treasury. Ultimately, in July 2013, Treasury sold its stake in Omega at auction at a loss and Omega’s missed payments were not repaid, resulting in a total taxpayer loss of more than $600,000.

The case is being investigated by SIGTARP, the Federal Bureau of Investigation and is brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On June 4, 2014, Leonard G. Potillo, III, was charged in a 33-count indictment with seven counts of wire fraud, ten counts of bribing a bank official and sixteen counts of money laundering in an alleged $76 million fraud scheme in the U.S. District Court for the Middle District of Florida. The scheme allegedly involved Potillo’s purchase and sale of delinquent debt portfolios from multiple TARP and other banks, and falsification of the quality of the debt to resell it at higher prices. If convicted, Potillo faces up to 30 years in Federal prison for the most serious offense of bank bribery.

According to the indictment, Potillo owns and manages United Credit Recovery, LLC (“UCR”), of Seminole County, Florida. Since at least as early as January 2008, Potillo and UCR allegedly sold charged-off consumer overdraft debt portfolios to third parties falsely representing the number of times a debt collection agency attempted to collect the debt, and therefore inflating its value. To conceal the quality of the debt accounts, Potillo also allegedly created, on a mass scale, fictitious “Affidavits of Correctness/Assignments” purportedly signed by bank officials and presented on letterhead with a bank’s official trademarked logo.

Furthermore, in exchange for inside information relating to TARP-recipient U.S. Bank’s auction of the overdraft debt portfolios, Potillo allegedly bribed a U.S. Bank officer on at least ten occasions totaling more than $1 million, which enabled Potillo to purchase 11 portfolios of overdraft debt worth $820 million for $31 million, or less than four cents on the dollar. In November 2008, U.S. Bancorp of Minneapolis, Minnesota, the parent company of U.S. Bank, received approximately $6.6 billion in Federal taxpayer funds through TARP. The bank repaid the funds in full in June 2009

This case is being investigated by SIGTARP, the United States Attorney’s Office for the Middle District of Florida, the Internal Revenue Service – Criminal Investigation, and the United States Secret Service.

On August 13, 2014, business executives James Crews and Michael Hilbert were each sentenced in the United States District Court for the Eastern District of Missouri to five years’ probation, having pled guilty on April 7, 2014, to bank fraud for their roles in defrauding TARP recipient Excel Bank. The sentence also required Crews and Hilbert jointly and severally to pay restitution of approximately $30,000 to the Federal Deposit Insurance Corporation (“FDIC”), and banned the defendants from being self-employed or employed as a consultant, as well as being involved in the creation, operation, or management of any business.

According to court documents, Crews and Hilbert, who jointly operated a real estate rental business in Missouri, admitted to making several large fraudulent construction draw requests with respect to “rehab” or “fix funds” specifically set aside in escrow for repairs to rental homes. The bank disbursed the “fix funds” in reliance on multiple false claims that work had been done on various rental properties. In reality, however, inspections by the bank revealed that the work was not performed and Crews and Hilbert used the funds for other purposes. Shortly after the funds were disbursed in 2010, the loans, totaling over $2.6 million lent by Excel Bank, went into default.

In May 2009, Investors Financial Corporation, the parent company of Excel Bank, received $4 million in TARP funds. On October 19, 2012, Excel Bank failed and was closed by state and Federal regulators. As a result of the failure, the entire $4 million TARP investment was lost as was more than $900,000 in TARP-related missed dividend and interest payments the bank owed Treasury. The FDIC, which became Excel Bank’s receiver when it closed, also lost $40.9 million. This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Missouri, and the Federal Bureau of Investigation.

On May 3, 2013, Lynn Nunes, a New York mortgage broker, was sentenced to 12 months in Federal prison followed by five years of supervised release for his role in a scheme to defraud mortgage lenders, including subsidiaries of TARP recipient banks Wells Fargo & Company, SunTrust Banks, Inc., and JPMorgan Chase & Co. Nunes was also ordered to pay $580,500 in restitution and to forfeit $40,000.

On April 24, 2012, Nunes pled guilty in Federal court in Brooklyn, New York, to conspiracy to commit bank and wire fraud against the mortgage lenders. From January 2005 through October 2010, Nunes and others recruited people interested in purchasing property but who had insufficient assets and income to secure a mortgage. Nunes prepared fraudulent mortgage applications for the potential purchasers by falsely inflating their bank account balances and income to make the applicants appear more creditworthy. Nunes submitted these falsified loan applications to the mortgage lenders, which issued mortgage loans in reliance on the false applications. The lenders suffered losses on the properties when many of the purchasers subsequently defaulted on the mortgage loans.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of New York, and the FBI.

On July 27, 2012, Robin B. Brass was sentenced by the U.S. District Court for the District of Connecticut to 96 months in Federal prison followed by three years of supervised release for defrauding investors of approximately $2 million. Brass pled guilty to mail fraud in April 2012. A hearing to determine restitution will be scheduled at a future date.

From March 2009 through November 2011, Brass successfully solicited funds from investors by falsely representing herself as a successful investment advisor, guaranteeing investors against losses, and promising them a good rate of return on their investment. Brass used some of the investor funds to pay off other investors to keep the scheme going and to pay personal expenses for herself and her family, including her mortgage at Bank of America, a TARP-recipient bank. To perpetuate the fraud scheme, Brass sent fraudulent account statements to investors that made it appear that their investments were performing well.

The case was investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, USPIS, the FBI, and with assistance from the State of Connecticut Department of Banking as part of the Connecticut Securities, Commodities and Investor Fraud Task Force.

On September 18, 2014, after his arrest by SIGTARP and its law enforcement partners, Selim Zherka, a/k/a “Sam Zherka,” a/k/a “Sammy Zherka,” of Somers, N.Y., was indicted by a Federal grand jury in the U.S. District Court for the Southern District of New York for submitting multiple false loan applications to banks, tax fraud, wire fraud, and witness tampering in connection with his years’ long schemes through which he obtained more than $146 million. Zherka’s victims included North Fork Bank – later purchased by TARP recipient bank Capital One Financial Corporation – from which he allegedly swindled more than $36.5 million.

The indictment charges Zherka with wire fraud in connection with his scheme to defraud the judgment creditor in connection with the 2000 judgment finding him liable by a New York State Supreme Court jury in Manhattan for assaulting that individual and for breaching a contract with him.

In addition, the indictment charges Zherka with perpetrating a long standing tax fraud scheme. Specifically, Zherka is alleged to have repeatedly submitted fraudulent tax returns to the Internal Revenue Service (“IRS”) that understated his capital gains and overstated his depreciation expenses on tax returns for the real estate holding companies in which he was a partner which, in turn, owned the above apartment housing complexes thus reducing their tax liabilities. The indictment also charges that Zherka obstructed the IRS by, among other means, failing to file personal tax returns for over a decade.

Finally, the indictment charges Zherka with tampering with witnesses in the grand jury’s investigation of this matter.

If convicted, Zherka faces the following maximum penalties:

For each of the 11 counts of submitting a false loan application, 30 years in prison

For the count of wire fraud and the count of witness tampering, 20 years in prison

For the count of conspiracy to obstruct the IRS and violate tax laws, five years in prison

For each of the 10 counts of making/subscribing to false tax returns, the 10 counts of aiding/assisting in the preparation of false tax returns, and the count of attempting to interfere with the administration Internal Revenue laws, three years in prison

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York (White Plains Division), the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation.

On August 29, 2014, the U.S. District Court for the Central District of California unsealed an indictment against Jerome Arthur Whittington, a/k/a Jerry Whittington, charging him with two counts of wire fraud in connection with two brazen investment schemes in which he feigned friendship and romantic interest and assumed fake identities to defraud his victims out of approximately $165,000.

In both cases, Whittington allegedly routed victims’ funds through TARP recipient banks including Bank of America and U.S. Bank.

If convicted, Whittington—who, in 1989, was featured on the television show “America’s Most Wanted” having been a fugitive for three years for impersonation and transportation of stolen property (among other crimes), and who is currently incarcerated in Louisiana—faces up to 30 years in Federal prison on each count.

As alleged in the indictment, in the first scheme, from January 2008 through September 2010, Whittington befriended the victim and expressed romantic interest while holding himself out as a wealthy real estate investor and an attorney; in reality, however, as Whittington well knew, Whittington was neither wealthy, a real estate investor, nor an attorney. Under these false pretenses, Whittington convinced the victim to sell her stock market investments and give him the proceeds, approximately $116,965, to invest in an undeveloped lot in Palm Springs, California. Whittington did not invest in the undeveloped property or any real estate as he had promised; instead, he spent the victim’s funds on personal expenses.

As further alleged, in the second scheme from November 2008 to around September 2012, Whittington befriended the victim, holding himself out as a wealthy businessman who owned, among other things, a jet airplane and a company, Desert Films, which Whittington claimed set up tracks for cameras used in filming movies. In fact, however, as Whittington well knew, he was not wealthy, did not own a jet airplane, and did not own any company called Desert Films that was involved in the film industry. Once he gained the victim’s trust, Whittington introduced the victim to another company, Sesma, which Whittington said had developed a new internet browser being used in China, and that Whittington had been offered to become the president of Sesma. After claiming that he had already invested $250,000 of his own money in Sesma, Whittington offered the victim an opportunity to invest in Sesma stock and manage the launch of a medical application of the web browser. Whittington convinced the victim to invest $48,340 and then strung the victim along, falsely claiming that the investment had become profitable and the victim would be paid as soon as the victim received a security clearance from Sesma. Whittington, however, had not in fact applied any of the victim’s money towards the purported purchase of stock in Sesma, rather, Whittington used the money for personal expenses.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation.

Charles Antonucci, the former president and chief executive officer of Park Avenue Bank, pleaded guilty on October 8, 2010, to offenses including securities fraud, making false statements to bank regulators, bank bribery, and embezzlement of bank funds. Antonucci was arrested in March 2010 after attempting to steal $11 million of TARP funds by, among other things, making fraudulent claims about the bank’s capital position. With his guilty plea, Antonucci became the first defendant convicted of attempting to steal from TARP.

Matthew L. Morris, Senior Vice President

On October 17, 2013, Matthew L. Morris, a former Park Avenue Bank (“Park Avenue”) senior vice president, pled guilty in Federal court in New York, New York, to conspiracy to commit bank bribery, conspiracy to commit fraud on bank regulators, conspiracy to commit wire fraud, and substantive fraud on bank regulators. At sentencing on July 15, 2014, Morris faces up to 30 years in Federal prison, a period of supervised release, a fine, and restitution.

On October 1, 2012, SIGTARP agents, along with its law enforcement partners, arrested Morris for his role in the bank fraud schemes that led to the failure of Park Avenue Bank, as well as an insurance fraud scheme. On the same day, the U.S. District Court for the Southern District of New York unsealed the 13-count indictment against Morris, which charged the defendant with conspiracy to commit bank bribery, bank and insurance fraud, and the theft of $2.3 million from a publicly traded company. Anthony Huff, a businessman from Kentucky, was also arrested and charged in connection with the bank fraud schemes as well as for insurance fraud and tax evasion. Allen Reichman, a former executive director of investments at an investment bank and financial services company, was also arrested and charged with conspiracy to commit wire fraud in connection with the alleged insurance fraud. Huff and Reichman’s cases are pending.

As senior vice president at Park Avenue, Morris managed the bank’s relationships with Huff and his business entities. As part of his plea agreement, Morris admitted that, from 2008 through 2009, he and Antonucci accepted up to $400,000 and other benefits in exchange for providing preferential treatment in connection with Huff’s banking relationship. In exchange for bribes, Morris admitted that he and Antonucci (i) caused Park Avenue Bank to issue fraudulent letters of credit totaling $1.75 million to aid Huff in securing an investment in a business he owned, (ii) allowed Huff to freely overdraft accounts at Park Avenue Bank in excess of $9 million in violation of bank policy, (iii) facilitated intra-bank transfers in furtherance of frauds perpetrated by Huff, and (iv) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to Huff-related businesses by circumventing the bank’s loan review procedures and allowing Huff to submit loan applications containing false statements.

Morris also admitted that in about October 2008, he devised a plan with Huff and Antonucci to prevent Park Avenue Bank from being designated as undercapitalized by its regulator, FDIC. Morris admitted that he, Huff, Antonucci and other co-conspirators used a series of fraudulent transactions to make it appear that Antonucci personally invested $6.5 million in Park Avenue Bank when, in actuality, the $6.5 million was part of Park Avenue Bank’s pre-existing capital. Morris admitted that he, Huff, and Antonucci further defrauded FDIC by making false statements to, and providing false documents to, FDIC about the true source of the funds used for Antonucci’s purported $6.5 million investment in Park Avenue Bank. To further conceal the fraudulent $6.5 million investment, Morris admitted that he and Huff had conspired to steal $2.3 million from a publicly traded company to partially fund the investment, and then attempted to conceal the theft with a fabricated Park Avenue Bank certificate of deposit. Antonucci emphasized to FDIC that his $6.5 million investment had stabilized the bank’s capital problems and should be considered favorably in evaluating the bank’s November 2008 request for $11.35 million in TARP funds through the Capital Purchase Program. Park Avenue Bank specifically referenced Antonucci’s $6.5 million investment in its TARP application.

Morris further admitted that, from July 2008 to November 2009, he conspired with Huff, Antonucci, and Reichman to defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of an Oklahoma insurance company. Morris, Huff, and Antonucci funded most of the purchase of the insurance company by convincing Reichman to cause the investment firm to issue a $30 million loan. Huff and Antonucci pledged the insurance company’s own assets as collateral for the loan, which was prohibited under Oklahoma law. Morris admitted that, to secure regulatory approval of the purchase of the insurance company, he, Huff, and Antonucci falsely represented to regulators that Park Avenue Bank was funding the purchase, thereby concealing the fact that the insurance company’s own assets were pledged as collateral for the loan. Morris stated that after the sale was finalized, they took millions of dollars of the insurance company’s assets for themselves. The insurance company later became insolvent and was placed into receivership.

On March 12, 2010, Park Avenue Bank was closed by the New York State Banking Department, and FDIC was appointed as receiver. FDIC estimates that Park Avenue Bank’s failure will cost the deposit insurance fund $50.7 million.

Allen Reichman, Executive Director

On February 20, 2015, Allen Reichman, a former executive director of investments at a New York investment firm, of Irvington, New York, pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud in connection with his participation in a massive scheme to defraud his employer and insurance regulators involving the fraudulent purchase of an Oklahoma insurance company by the former President and Chief Executive Officer (“CEO”) of TARP applicant, Park Avenue Bank, with whom Reichman conspired.

According to the information, plea agreement, and statements made during court proceedings: During the relevant time period, Reichman was an executive at an investment bank and financial services company headquartered in New York, New York (the “Investment Firm”). From July 2008 to November 2009, Reichman conspired with Charles J. Antonucci, Sr. and Matthew L. Morris, the President and Senior Vice President, respectively, of TARP applicant Park Avenue Bank, a New York bank, and Wilbur Anthony Huff, a Kentucky businessman who controlled numerous entities located throughout the United States, to defraud the Investment Firm and Oklahoma insurance regulators regarding Antonucci’s purchase of Providence Property and Casualty Insurance Company (“Providence P&C”), an Oklahoma insurance company that was owed $5 million by a company Huff controlled. Providence P&C was licensed to operate by the Oklahoma Insurance Department (“OID”), which regulated various practices of Oklahoma insurance companies. Under the OID’s regulations and applicable Oklahoma law, Providence P&C was required to maintain a certain amount of assets to ensure that adequate funds were on hand to pay policyholders’ claims and anticipated claims.

Reichman and his co-conspirators schemed to defraud the Investment Firm into providing a $30 million loan to finance Antonucci’s purchase of Providence P&C and to mislead Oklahoma insurance regulators into approving the purchase. The $30 million loan from the Investment Firm to purchase Providence P&C was secured by Providence P&C’s own assets, including the reserve assets to pay claims. Because Oklahoma insurance regulators had to approve any sale of Providence P&C, and because Oklahoma law forbade the use of Providence P&C’s assets as collateral for such a loan, Reichman, Huff, Morris, and Antonucci, made, and conspired to make, a number of material misstatements and material omissions to the Investment Firm and Oklahoma insurance regulators concerning the true nature of the financing for the purchase, including that Park Avenue Bank was funding the purchase. Specifically, Investment Firm executives and others warned Reichman on several occasions that using Providence P&C’s assets as collateral for the loan was illegal and that he should not cause the loan to be issued. Reichman, however, ignored these warnings and instead provided misleading information to various individuals at the Investment Firm and elsewhere regarding the loan, including directing Antonucci to sign a letter that provided false information regarding the collateral that would be used for the loan. Despite the warnings from Investment Firm executives and others, and Reichman’s knowledge that the loan was in fact illegal, on or about January 30, 2009, Reichman caused the Investment Firm to issue the illegal $30 million loan, secured by the very assets that were supposed to be unencumbered and maintained in reserve to pay Providence P&C’s policyholder claims.

After deceiving the Investment Firm into issuing the $30 million loan, Reichman received at least $200,000 in commissions from the Investment Firm as a result of the illegal loan. Ultimately, in November 2009, Providence P&C became insolvent and was placed in receivership because its surplus reserves were encumbered by the $30 million loan, and therefore unavailable to pay policyholder claims, and because Huff, Morris, and Antonucci had pilfered Providence P&C’s remaining assets.

At sentencing, Reichman faces up to five years in federal prison. Additionally, as part of his plea agreement, Reichman also agreed to forfeit $200,000 to the United States and to provide restitution of $10 million to the Investment Firm.

This case is being investigated by SIGTARP, the Federal Bureau of Investigation, the Internal Revenue Service, the New York State Department of Financial Services, Immigration and Customs Enforcement Homeland Security Investigations, and the Federal Deposit Insurance Corporation Office of Inspector General. It is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

Wilbur Anthony Huff, Businessman

On December 23, 2014, Wilbur Anthony Huff, a businessman of Caneyville and Louisville, Kentucky, pled guilty in the United States District Court for the Southern District of New York to various tax crimes that caused more than $50 million in losses to the Internal Revenue Service (“IRS”), and a massive fraud that involved the bribery of senior bank officials at TARP applicant, Park Avenue Bank, the fraudulent purchase of an insurance company, and the defrauding of insurance regulators. In October 2010, Charles J. Antonucci, Sr., the President and Chief Executive Officer of TARP applicant Park Avenue Bank (and one of Huff’s co-conspirators) pled guilty to securities fraud in connection with his attempt to fraudulently obtain more than $11 million in TARP funds, becoming the first individual convicted of attempting to steal from TARP.

According to the information, plea agreement, and statements made during court proceedings: Huff controlled numerous entities located throughout the United States (“Huff-Controlled Entities”), including the companies and their finances, using them to orchestrate a $53 million fraud on the IRS as well as other illegal schemes. Rather than exercise control of these companies openly, Huff concealed his control by installing other individuals to oversee the companies’ day-to-day functions and to serve as the companies’ owners, directors, or officers in name only. Huff also maintained a corrupt relationship with TARP applicant Park Avenue Bank and its executives, Antonucci, and Matthew L. Morris, the Senior Vice President.

Tax Crimes - From 2008 to 2010, Huff controlled an entity called O2HR, a professional employer organization (“PEO”) located in Tampa, Florida. Like other PEOs, O2HR was paid to manage the payroll, tax, and workers’ compensation insurance obligations of its client companies. However, instead of paying $53 million in taxes that O2HR’s clients owed the IRS, and instead of paying $5 million to Providence Property and Casualty Insurance Company (“Providence P&C”) – an Oklahoma-based insurance company – for workers’ compensation coverage expenses for O2HR clients, Huff stole the money that his client companies had paid O2HR. Among other things, Huff diverted millions of dollars from O2HR to fund his investments in unrelated business ventures, and to pay his family members’ personal expenses, including mortgages on Huff’s homes, rent payments for his children’s apartments, staff and equipment for his farm, designer clothing, jewelry, and luxury cars.

Conspiracy to Commit Bank Bribery, Defraud Bank Regulators, and Fraudulently Purchase an Oklahoma Insurance Company - From 2007 through 2010, Huff engaged in a massive multi-faceted conspiracy, in which he schemed to (i) bribe executives of TARP applicant Park Avenue Bank, (ii) defraud bank regulators and the board and shareholders of a publicly-traded company and (iii) fraudulently purchase an Oklahoma insurance company.

Bribery of Park Avenue Bank Executives - From 2007 to 2009, Huff paid bribes totaling hundreds of thousands of dollars in cash and other items to bank executives Morris and Antonucci, in exchange for their favorable treatment at Park Avenue Bank, including providing fraudulent letters of credit obligating Park Avenue Bank to pay one of Huff’s investors $1.75 million if Huff failed to repay the investor himself; allowing Huff-Controlled Entities to accrue $9 million in overdrafts; facilitating intra-bank transfers in furtherance of the schemes; and fraudulently causing Park Avenue Bank to issue at least $4.5 million in loans to Huff-controlled entities.

Fraud on Bank Regulators & a Publicly-Traded Company - As part of the corrupt relationship between Huff and the bank executives, Huff, Morris, Antonucci, and others conspired to defraud various entities and regulators during the relevant time period. Specifically, Huff conspired with Morris and Antonucci to falsely bolster Park Avenue Bank’s capital to prevent Park Avenue Bank from being designated as “undercapitalized” by regulators by orchestrating a series of fraudulent “roundtrip” transactions to make it appear that Park Avenue Bank had received an outside infusion of $6.5 million from Antonucci when, in actuality, the $6.5 million was part of the bank’s pre-existing capital. This was done so the bank could continue engaging in certain banking transactions it would otherwise have been prohibited from doing and to put the bank in a better position to receive over $11 million in TARP funds. To conceal the true source of the funds from regulators, Huff, Morris, and Antonucci engaged in a series of additional fraudulent actions including (a) creating documents falsely suggesting Antonucci had earned the $6.5 million through a bogus transaction with another company Antonucci owned; and (b) stealing $2.3 million from a publicly-traded temporary staffing company to pay Park Avenue Bank back for funds used in the $6.5 million round trip transaction.

Fraud on Insurance Regulators & an Investment Firm - From July 2008 to November 2009, Huff, Morris, and Antonucci conspired to defraud Oklahoma insurance regulators and the Investment Firm by making material misrepresentations and omissions regarding the source of $37.5 million used to purchase Providence Property and Casualty Insurance Company, an Oklahoma insurance company that provided workers’ compensation insurance for O2HR’s clients, and to whom O2HR owed a significant debt. Allen Reichman, an executive at an investment bank and financial services company headquartered in New York, New York (the Investment Firm), is also charged with participation in the same scheme.

At sentencing, scheduled for April 8, 2015, Huff faces up to three years in federal prison and one year of supervised release for his guilty pleas to one count each of corruptly endeavoring to obstruct and impede the due administration of the internal revenue laws, and aiding and assisting with the preparation and presentation of false and fraudulent tax returns. Huff further faces a maximum of five years’ imprisonment and three years’ supervised release for his plea to one count of conspiracy to (a) commit bank bribery, (b) commit fraud on bank regulators and the board and shareholders of a publicly-traded company, and (c) fraudulently purchase an Oklahoma insurance company. Finally, he faces up to one year imprisonment and up to one year of supervised release in connection with his plea to one count of failing and causing the failure to pay taxes to the IRS. As part of his plea, Huff also agreed to forfeit $10.8 million to the United States, including 13 Kentucky properties as well as a golf course, and to provide restitution of more than $128 million to his victims including over $4.8 million to the FDIC and more than $53 million to the IRS.

Antonucci, who was charged separately by complaint on March 15, 2010, pleaded guilty to his role in the crimes described above on October 8, 2010. Together with Huff, Morris and Reichman were charged by indictment [unsealed] on October 1, 2012. Morris pleaded guilty on October 16, 2013, and Reichman is currently scheduled to go to trial on March 9, 2015.

The case is being investigated by SIGTARP, the Federal Bureau of Investigation, the Internal Revenue Service Criminal Investigation, the New York State Department of Financial Services, Immigration and Customs Enforcement’s Homeland Security Investigations, and the Federal Deposit Insurance Corporation Office of Inspector General. The U.S. Department of Justice’s Tax Division and the U.S. Attorney’s Office for the Southern District of Florida assisted the investigation.

The case is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York Complex Frauds and Cybercrime Unit and was brought in coordination with President Obama’s Financial Fraud Enforcement Task Force.

On May 7, 2013, Clayton A. Coe, former vice president and senior commercial loan officer at FirstCity Bank (“FirstCity”), was sentenced to 87 months in Federal prison followed by five years of supervised release, and ordered to pay $19.5 million in restitution, jointly with co-defendants, Mark A. Conner, former president, chief executive officer and chairman of FirstCity, and Robert E. Maloney, Jr., former in-house counsel. Coe was also ordered to pay separately $122,285 in restitution to the IRS. In February 2009, FirstCity unsuccessfully sought $6.1 million in Federal Government assistance through TARP. FirstCity failed and was seized by Federal and state authorities on March 20, 2009.

Coe previously pled guilty in Federal court in Atlanta, Georgia, to bank fraud and to making a false statement on his tax return. As the senior commercial loan officer at FirstCity, Coe was primarily responsible for recommending to FirstCity’s loan committee whether to approve commercial loans to real estate developers. Coe admitted to defrauding FirstCity by causing FirstCity’s loan committee to approve an $800,000 loan to a borrower in connection with a real estate development transaction that provided a personal financial benefit to Coe. Coe concealed from FirstCity’s loan committee that the borrower used the loan proceeds to purchase land lots from a company owned by Coe and his wife and that the Coes had purchased these lots from the owner at a lower sales price on the same day the loan to the borrower closed. Coe also admitted to failing to report $476,000 in commissions to the Internal Revenue Service that he earned for loans he originated as FirstCity’s senior commercial loan officer.

Conner and Maloney have each been sentenced, after pleading guilty, for their roles in the scheme to defraud FirstCity. Conner was sentenced to 12 years in Federal prison followed by five years of supervised release, banned for life from the banking industry, agreed to forfeit $7 million, and ordered to pay more than $19.5 million in restitution after pleading guilty to conspiracy to commit bank fraud and perjury for his role in the scheme. Conner admitted to defrauding FirstCity’s loan committee and board of directors into approving multiple multi-million-dollar commercial loans to borrowers who were actually purchasing property owned by Conner or his co-conspirators. Maloney was sentenced to 39 months in Federal prison followed by three years of supervised release and ordered to pay $10.5 million in restitution. Maloney also agreed to a lifetime ban from working in the banking industry. Maloney admitted to disguising the personal financial interests of Conner in a July 2007 real estate loan. Maloney admitted to receiving approximately $483,000 of those loan proceeds into his attorney escrow account that was maintained at FirstCity and using those funds to make payments and transfers to and for Conner’s benefit.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Georgia, the FBI, IRS-CI, and FDIC OIG.

Omni National Bank (“Omni”), a national bank headquartered in Atlanta, failed and was taken over by the FDIC on March 27, 2009. Prior to its failure, Omni applied for, but did not receive, TARP funding under CPP. SIGTARP’s participation in a mortgage fraud task force, which also includes the U.S. Attorney’s Office for the Northern District of Georgia, FDIC OIG, HUD OIG, the U.S. Postal Inspection Services (“USPIS”), and FBI, has resulted in criminal charges, convictions, and sentencings against multiple individuals concerning Omni.

Most recently, on June 1, 2011, Karim Walthour Lawrence, a former loan officer of Omni, was sentenced by the U.S. District Court for the Northern District of Georgia to serve 21 months in Federal prison on charges of accepting bribes from contractors he selected to renovate Omni-foreclosed properties while he was an officer for Omni. Lawrence pled guilty in January 2011 to one count of receiving commissions or gifts for procurement of loans. In his role as a bank officer at Omni, from February 2008 to March 2009, Lawrence had the authority to select contractors to perform renovations on foreclosed properties the bank owned. Lawrence corruptly accepted hundreds of thousands of dollars from contractors who wanted to perform work on the Omni houses. Contractors who hoped to influence Lawrence paid him more than $600,000 in cash and services.

On April 22, 2011, Jeffrey L. Levine, a former executive vice president of Omni and head of the bank’s Community Redevelopment Lending Department, was sentenced by the U.S. District Court for the Northern District of Georgia to serve five years in prison on charges of causing materially false entries to be made on the books, reports, and statements of the bank that overvalued the bank’s assets. Levine and others at Omni failed to disclose many exceptions made to Omni’s policies and procedures that resulted in Omni being exposed to greater risk of loss. Practices that went unreported included: diversion of loan proceeds escrowed for rehab; excessive credit concentrations to a single borrower; funding additional loans for Omni foreclosures at ever-increasing amounts; and failing to create sufficient reserves for those questionable loans or to properly record them on Omni’s books and records.

Also on April 22, 2011, Delroy Oliver Davy was sentenced by the same court to serve 14 years in prison on charges of bank fraud and conspiring to commit bank, mail, and wire fraud. Davy’s conduct included forming corporations and companies to purchase properties from financial institutions secured by the FDIC, including Omni. Davy would “flip” the properties within a short period of time to unqualified “investors,” and arrange mortgage loans from banks based on false qualifying information, all while concealing from the lenders that his own companies had recently purchased the properties for amounts significantly less than the new loans. Davy paid kickbacks to a loan officer at Omni, as well as to employees at another lender, who approved the funding for his “investors.” Ultimately, Davy’s scheme forced many properties into foreclosure, causing lenders, insurers and others to incur millions of dollars in losses. Davy also collected money from investors by falsely promising they would receive property, which they never received.

Previously, Brent Merriell was sentenced in August 2010 to 39 months in prison for his role in a scheme to prompt Omni to forgive $2.2 million in loans. Merriell had pled guilty to charges of making false statements to the FDIC and six counts of aggravated identity theft in connection with the scheme. In addition, Christopher Bernard Loving was sentenced in August 2010 to three years of probation for making false statements to agents of SIGTARP and the FDIC in connection with an investigation of kickbacks he paid Lawrence for construction contracts.

On September 30, 2014, and October 3, 2014, respectively, Christopher Tumbaga, former loan officer at TARP recipient, Colorado East Bank and Trust (“CEBT”), and Brian Headle, high school friends, both of Colorado Springs, Colorado, were each sentenced in the U.S. District Court for the District of Colorado to 36 months in Federal prison and ordered to pay restitution of $1,055,918, jointly and severally, for their roles in a scheme to defraud CEBT. Tumbaga was sentenced for bank fraud and illegally receiving kickbacks for fraudulently approving approximately $1.2 million in loans for Headle in return for more than $60,000 in illegal kickbacks, and Headle was sentenced for corruptly influencing a bank officer.

Tumbaga and Headle were charged jointly on September 25, 2013. Tumbaga pled guilty on March 24, 2014, and, as part of his plea agreement, agreed to a ban from future involvement in banking activities. Headle pled guilty on June 26, 2014.

According to court documents, from March 2009 through July 2011, Tumbaga used his position as a loan officer at CEBT to fraudulently approve over 14 loans to, and misapplied funds from a line of credit for the benefit of Headle.

Additionally, in March 2009, Headle contacted Tumbaga to discuss securing a loan or line of credit from CEBT to finance Headle’s real estate development business. Tumbaga then secured a $250,000 line of credit for Headle based on false financial information that Tumbaga intentionally failed to verify. Shortly thereafter, Headle and Tumbaga formed a partnership in which Tumbaga would secure fraudulent loans for Headle’s benefit and, in return, Tumbaga would receive from Headle kickbacks financed by profits from Headle’s real estate venture.

To help disguise that the loans were, in fact, for Headle’s benefit, Tumbaga fraudulently obtained the loans in multiple names, including Headle’s company, Headle’s wife, and her company. Later, when additional loans were needed to maintain payments on outstanding loans, Tumbaga obtained still more fraudulent loans in the name of Headle’s parents and step-parent. When approval for a loan was needed from the bank’s president, Tumbaga forged the bank president’s signature. Additionally, in one instance, Tumbaga withdrew $100,000 from another bank customer’s line of credit and wired the money to Headle, all unbeknownst to the bank customer. In all, Headle gave Tumbaga 11 kickbacks totaling over $60,000, and, as a result of the kickbacks, Tumbaga secured approximately $1.2 million from CEBT for Headle’s benefit.

In February 2009, just before Tumbaga and Headle began their scheme, ColoEast Bankshares, Inc., the parent company of CEBT, received $10 million through the TARP Capital Purchase Program. Tumbaga and Headle’s conduct resulted in a total loss of over $1 million to CEBT and the bank was later unable to pay more than $1 million in dividends it owed to taxpayers. In July 2013, the U.S. Department of the Treasury sold its stake in the company at auction for approximately $9 million. In total, more than $2 million owed to Federal taxpayers was lost on the investment.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Colorado, the Federal Deposit Insurance Corporation Office of Inspector General, and the Federal Bureau of Investigation. This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On April 5, 2013, Adam Teague, former senior vice president and senior loan officer of Appalachian Community Bank (“Appalachian”) was sentenced to 70 months in Federal prison followed by five years of supervised release, ordered to pay $5.8 million in restitution to the Federal Deposit Insurance Corporation (“FDIC”), and ordered to forfeit $7 million and certain real property in connection with his conviction for conspiracy to commit bank fraud for his participation in a scheme to defraud Appalachian of millions of dollars and hide certain past-due Appalachian loans from FDIC. In February 2012, FDIC issued a lifetime ban against Teague from working in the banking industry.

William R. “Rusty” Beamon, Jr., Vice President

On December 19, 2014, William R. Beamon, Jr., aka “Rusty,” of DeKalb County, Georgia, was convicted after a jury trial in the U.S. District Court for the Northern District of Georgia on five counts of bank fraud related to his scheme to defraud TARP applicant Appalachian Community Bank (“Appalachian”). Beamon was indicted on February 26, 2013. At sentencing, Beamon faces up to 30 years in federal prison for each count.

According to court filings, as vice president at Appalachian, Beamon was in charge of the bank’s foreclosure liquidation department. Beamon was also the sole owner of a shell company, Newmon Properties, LLC (“Newmon Properties”). Beamon and his co-conspirators devised and executed a fraudulent scheme in which they diverted funds from the bank. For example, in October 2009, Beamon lied to a real estate agent by stating that Beamon owned a property that, as Beamon knew, was actually owned by Appalachian as a foreclosed property. Beamon directed the real estate agent market and lease that property as if Beamon owned it. From April 2009 through December 2009, Beamon collected and deposited more than $23,000 in illegal rent payments and security deposits into his personal bank account. Further, Beamon fraudulently caused Appalachian to issue Newmon Properties a Platinum credit card which he used to obtain a cash advance from Appalachian for more than $91,000. Beamon further used the cash to purchase from Appalachian a cashier’s check for the same amount with which he purchased another property in the bank’s foreclosure inventory at below the fair market value. Less than two weeks later, Beamon sold the property for more than $148,000. In October 2008, Appalachian applied for, but did not receive, $27 million in TARP funding. On March 19, 2010, Appalachian was closed by the Georgia Department of Banking and Finance, which appointed the FDIC as receiver. The FDIC estimated that Appalachian’s failure would cost the deposit insurance fund more than $419 million.

In October 2008, Appalachian applied for, but did not receive, $27 million in TARP funding. On March 19, 2010, Appalachian was closed by the Georgia Department of Banking and Finance, which appointed FDIC as receiver. FDIC estimates that Appalachian’s failure will cost the deposit insurance fund more than $419 million.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Georgia, the Federal Deposit Insurance Corporation Office of Inspector General, the Federal Bureau of Investigation, and the Federal Housing Finance Agency Office of Inspector General. This case was prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On May 14, 2014, Daniel Carpenter and Wayne Bursey, senior executives of several companies that marketed, sold, and administered employee welfare benefit plans, were charged by a grand jury in Hartford, Connecticut, in a 57-count indictment with conspiracy, fraud, and money laundering stemming from a scheme to defraud insurance companies into issuing policies on the lives of elderly people for the benefit of defendants and other third-party investors, also known as a stranger-originated life insurance (“STOLI”) scheme. If convicted, Carpenter and Bursey face a maximum of 20 years in Federal prison.

On December 9, 2013, Joseph Edward Waesche, IV, an insurance agent licensed by the State of Connecticut and charged separately, pled guilty in Federal court in Hartford, Connecticut, for his participation in the fraud scheme and faces up to five years in Federal prison.

Carpenter and Bursey allegedly defrauded, among other insurance providers, Lincoln National Life Insurance Company (“Lincoln”), a subsidiary of Lincoln National Corporation, a holding company that received $950 million in TARP funds in July 2009.

According to the May 2014 indictment, Carpenter and Bursey ran a series of companies in Simsbury and Stamford, Connecticut, that developed an employee welfare benefit plan and trust (the “Trust”). The Trust’s primary objective was to secure insurance policies on the lives of elderly individuals that could be held by defendants as other investments, or re-sold on the life settlement market, a third-party market for life insurance policies. Typically, insurance agents working with, for, or on behalf of the defendants, would approach individuals over the age of 70 and promise to provide free life insurance for two years (the “Straw Insureds”). At the end of the two-year period, the agents would try to sell the policies in the life settlement market. In most cases, agents promised the Straw Insureds that they would receive a portion of any sale proceeds. In other cases, the Straw Insureds were offered cash up front to participate.

As the trustee, Bursey signed all life insurance applications on behalf of the Trust, which would “own” all of the policies. Working with insurance agents, Carpenter and Bursey allegedly caused the submission of insurance applications containing material misrepresentations, including applications falsely: (a) denying that third-parties were paying premiums, (b) denying discussions about policy resale, (c) inflating the insured’s net worth or income, and (d) claiming that the insurance was for legitimate estate-planning needs. However, as the indictment alleges, premiums were in fact funded by loans, typically from another entity owned and/or run by Carpenter and Bursey, and each policy was obtained with the primary intent to resell it. These arrangements were withheld from the insurance providers which likely would not have issued policies had they known the truth.

In addition, as Carpenter and Bursey well knew, the applications falsely claimed that the Trust was a bona fide welfare benefit trust under the Internal Revenue Code, where employers would make contributions to the Trust to fund life insurance policies for certain employees.

In all, Carpenter and Bursey’s alleged lies caused eighty-four policies on the lives of seventy-six different Straw Insureds to be issued. According to the indictment, one such individual unexpectedly died within the first two years of two insurance policies having been issued on his life. The policies were issued in 2006 and 2007 based on some of the same misrepresentations including that they were not funded by a third party loan and not for resale. In May 2009, the insurer paid to the Trust the policies’ combined death benefit of $30 million in part based on additional misrepresentations by Carpenter and Bursey. The trust failed to pay the $30 million to the beneficiary’s family, however, instead, as directed by Carpenter and Bursey, the Trust funneled the funds to pay for various expenses including other fraudulent insurance premiums and to purchase a home in Rhode Island.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Department of Labor – Office of Inspector General.

On February 25, 2013, and March 12, 2013, wife and husband Cheri Fu (also known as Cheri L. Shyu) and Thomas Chia Fu were sentenced to 36 months and 21 months, respectively, in Federal prison followed by five years of supervised release each for their roles in bilking nearly $5 million from a group of banks, including TARP recipient banks. The Fus were also ordered to jointly pay $4.7 million in restitution.

On January 26, 2012, the Fus, owners of Galleria USA, Inc. (“Galleria”), pled guilty to bank fraud in Federal court in Santa Ana, California. Galleria imported home decor items manufactured in China for sale in the United States. The Fus obtained a $130 million revolving line of credit for Galleria from seven banks, some of which were TARP recipients, including Bank of America and United Commercial Bank. The Fus admitted to significantly overstating to the banks the amount of Galleria’s accounts receivable in order to be able to continue borrowing funds under the line of credit. The Fus admitted to providing false financial reports to the banks and falsifying Galleria’s computer system to support the exaggerated accounts receivable figures they provided to the banks. The banks suffered an estimated loss of $4.7 million.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the FBI, and the U.S. Secret Service.

On February 24, 2015, Chung Yu “Louis” Yeung, of San Dimas, California, was arrested by federal agents following the unsealing of his October 22, 2014, indictment in the United States District Court for the Central District of California for one count of conspiracy to commit bank fraud and five counts of bank fraud in connection with a $9 million scheme to defraud TARP recipients United Commercial Bank (“UCB”) and East West Bank, which took over UCB’s accounts. Additionally, on the same day, Guo Xiang “David” Fan was indicted for bank fraud, and conspiracy to commit bank fraud, as well as conspiracy to commit money laundering for his alleged role in the scheme. As of March 31, 2015, Fan remained at large. If convicted, Yeung and Fan each face a maximum of 30 years imprisonment for each count of bank fraud and conspiracy to commit bank fraud, and Fan faces up to ten years imprisonment on the money laundering conspiracy count.

According to the indictment, from around June 2007 to September 2012, Yeung, who was Vice President of Eastern Tools and Equipment (“Eastern Tools”), an Ontario, California, company that sold portable generators and other equipment, and Fan, who was Eastern Tool’s President, along with others overstated Eastern Tools’ accounts receivable to increase its line of credit with UCB and later East West Bank. To support the inflated accounts receivable, Yeung, Fan and others allegedly opened approximately 20 shell companies backstopped with fictitious business name statements, post office boxes, bank accounts, and telephone numbers. Then, Yeung, Fan and others allegedly moved money from Eastern Tools’ bank accounts into the shell companies’ bank accounts to create the false appearance of substantial commercial activity and make fraudulent requests to both draw down money under the line of credit and increase the maximum amount of available funds. Finally, Yeung, Fan and others allegedly siphoned those funds into their own personal accounts.

East West Bank allegedly sustained a loss of around $9,157,000 as a result of the scheme.

In November 2008, UCBH Holdings, Inc., UCB’s parent company, received $298.7 million in TARP funds. On November 6, 2009, UCB failed and was taken over by state and federal regulators. As a result of the bank’s failure, none of the TARP funds were repaid and the entire $298.7 million TARP investment has been written off.

The case is being investigated by SIGTARP, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by the United States Department of Justice Criminal Division’s Fraud Section in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

In September 2012, SIGTARP agents, along with its law enforcement partners, arrested 11 individuals who had been charged by a Federal grand jury in the Central District of California with running a massive fraudulent mortgage modification scheme in Rancho Cucamonga, California, through 21st Century Real Estate Investment Corp. and several related companies (“21st Century”). The indictment charged the defendants with five counts of mail fraud, three counts of wire fraud, and one count of conspiracy. Each count in the indictment carries a statutory maximum penalty of 20 years imprisonment.

The indictment alleges that, between approximately June 2008 and December 2009, defendant Andrea Ramirez operated 21st Century as a fraudulent mortgage modification business. The charges allege that 21st Century employees (including the defendants) contacted financially distressed homeowners through cold calls, advertisements, mailings, and websites. In solicitations and during conversations with homeowners, 21st Century employees made numerous materially false statements, including: (a) assertions that multiple lawyers were employed with the company to assist in mortgage modifications; (b) false testimonials from 21st Century customers who purportedly received satisfactory modifications through 21st Century; (c) claims that 21st Century had a “98% ratio of success” with loan modifications; (d) assurances that homeowners would receive a refund of fees paid to 21st Century if the company was unable to obtain a loan modification; (e) guarantees that 21st Century could obtain specific interest rates and reduced mortgage payments for homeowners; (f) statements that 21st Century was sponsored by the United States Government; (g) statements that homeowners were preapproved for loan modifications; and (h) assurances that 21st Century would use fees paid by homeowners to pay the homeowners’ mortgage lenders. In truth, according to the indictment, 21st Century rarely was successful in obtaining loan modifications, rarely refunded fees to homeowners, had only one attorney affiliated with the company and this attorney rarely worked on homeowner files, could not know whether and under what terms a mortgage lender would offer a homeowner a modification, was not sponsored by the United States Government, did not use fees received from homeowners to pay the homeowners’ mortgages, and regularly instructed homeowners to stop making mortgage payments to their lenders and to cut off all contact with their lenders because they were represented by 21st Century.

The indictment further alleges that when 21st Century did submit loan modification applications to lenders, those applications frequently included false information, including forged rental agreements (which created the impression that homeowners were receiving rental income) and false statements exaggerating the homeowners’ financial hardship. Many of the financial institutions to which the 21st Century employees sent this false information were either TARP-recipient banks (including Wells Fargo Bank) or had agreed to otherwise participate in HAMP.

It is also alleged that on some occasions 21st Century employees told homeowners that 21st Century was using fees paid by the homeowners to make mortgage payments, when in fact they were simply keeping the homeowners’ money. In total, 21st Century fraudulently obtained at least $7 million from more than 4,000 victims, and many homeowners lost their homes to foreclosure.

On September 11, 2013, a superseding indictment was returned against Alan David Tikal, his wife Tamara Teresa Tikal, and Ray Jan Kornfeld for their roles in a fraudulent mortgage rescue operation. Tamara Tikal and Kornfeld were arrested by SIGTARP agents and its law enforcement partners on September 12, 2013. It is alleged that Tamara Tikal and Kornfeld continued the scheme after Alan Tikal’s initial arrest in September 2012.

On March 5, 2015, Alan David Tikal, formerly of Brentwood, California, was sentenced in the United States District Court for the Eastern District of California to serve 24 years in federal prison following his convictions on eleven counts of mail fraud and one count of mail fraud relating in connection with a massive, nationwide foreclosure rescue scam. The sentence followed a September 15, 2014, conviction after a bench trial before United States District Judge Troy L. Nunley. Additionally, on February 19, 2015, co-defendant, Ray Jan Kornfeld, of Las Vegas, Nevada, was sentenced in the same court to five years in federal prison for his role in the mortgage relief scam, after having pleaded guilty to one count of conspiracy.

According to evidence presented at Tikal’s trial, between January 7, 2010, and August 20, 2013, Tikal was the principal behind a business known as KATN, which targeted distressed homeowners experiencing difficulties making their existing monthly mortgage payments. Many of the victims did not speak English. Tikal promised to reduce their outstanding mortgage debt by 75 percent, falsely claiming he was a registered private banker with access to an enormous line of credit and the ability to pay off homeowners’ mortgage debts in full. Tikal told homeowners that in return for various fees and payments, their existing loan obligations would be extinguished, and the homeowners would then owe new loans to Tikal in a reduced amount equaling 25 percent of their original obligation. In reliance on misrepresentations made by Tikal, many of these homeowners stopped making payments on their existing mortgage loans and, as a result, lost their homes to foreclosure.

In fact, however, Tikal never made any payments to financial institutions on behalf of homeowners in satisfaction of their pre-existing mortgage debt obligations; the purported “loan” payments homeowners paid to Tikal were deposited into accounts at, among others, TARP recipient bank, JPMorgan Chase, and simply spent by Tikal, his family and his associates for personal use; and there was not a single instance in which a homeowner’s debt was paid, forgiven or otherwise extinguished as a result of the mortgage relief program. In all, Tikal and his associates convinced more than 1,000 homeowners in California and other states to participate in the program. As a result of their participation, many homeowners became delinquent on their loans and ultimately had their homes foreclosed upon. Collectively, those homeowners paid more than $5,800,000 in fees and monthly payments into the program. Of that, $2,500,000 or more was paid into accounts controlled by Tikal and/or his family.

In sentencing Tikal, Judge Nunley discussed the victims who, as a result of their participation in Tikal’s scam, “can’t reside in houses they had, in some instances, spent their entire lives trying to pay off.” Judge Nunley called Tikal “the mastermind behind this whole scheme,” and said Tikal was deserving of the sentence he was receiving.

Tamara Tikal pleaded guilty in August 2014 to conspiracy, mail fraud, and money laundering for her role in the scheme, and faces up to five years in federal prison when sentenced.

This case is being investigated by SIGTARP, IRS-CI, the California Department of Justice, and the Stanislaus County District Attorney’s Office.

The case is being prosecuted by the U.S. Attorney’s Office for the Eastern District of California and the California Attorney General’s Office, in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On May 3, 2012, Frederic Alan Gladle was sentenced by the U.S. District Court for the Western District of Texas to 61 months in Federal prison, following his previous guilty plea to bankruptcy fraud and aggravated identity theft. The charges stem from Gladle’s operation of a foreclosure-rescue scam involving more than 1,100 distressed homeowners and several banks, including TARP banks. As part of the sentence, the court also ordered Gladle to pay $214,259 in restitution and to forfeit $87,901.

Gladle admitted that, from 2007 to 2011, he promised homeowners whose properties were being foreclosed upon that, in exchange for a monthly fee, he would postpone the foreclosure for at least six months. After collecting fees from a homeowner, Gladle would have the homeowner execute a deed granting a small interest in their property to a random debtor in bankruptcy whose name Gladle found in bankruptcy records. Neither the homeowner nor the bankruptcy debtor was aware of Gladle’s misuse of the debtor’s bankruptcy petition. Gladle further defrauded the bank that had issued the loan to the homeowner by providing the bank a copy of the debtor’s bankruptcy petition showing that the debtor owned an interest in the homeowner’s property that the lender was attempting to foreclose upon. Upon receipt of these documents, the lender was legally obligated to and did terminate the foreclosure proceeding against the homeowner. As a result, multiple lenders, including TARP recipient banks Bank of America, Wells Fargo Bank and U.S. Bank, incurred costs and delays while attempting to collect money that was owed to them. Gladle admitted that he collected more than $1.6 million in fees from homeowners through this scam.

Glen Alan Ward (aka Brandon Michaels)

On August 5, 2013, Glen Alan Ward, a former Los Angeles resident who fled to Canada and was a Federal fugitive for 12 years, was sentenced to 11 years in Federal prison followed by three years of supervised release, and ordered to pay approximately $60,000 in restitution for his prominent role in a nearly 15-year foreclosure fraud scheme in California.

Ward pled guilty to bankruptcy fraud and aggravated identity theft on April 8, 2013. Ward solicited and recruited homeowners whose properties were in danger of imminent foreclosure, including foreclosures by TARP banks, promising to delay the foreclosures for a $700 fee. Ward’s actions victimized more than 800 struggling homeowners, stole the identities of unsuspecting victims involved in bankruptcy proceedings, and exploited bankruptcy laws to defraud lenders, which included numerous TARP banks, including Bank of America and U.S. Bank.

In order to impede these foreclosure sales, Ward stole identities of unsuspecting debtors who recently filed bankruptcy. He then directed his paying clients to grant an interest in their distressed home to one of those debtors, and subsequently directed the homeowner’s lender to stop the impending foreclosure sale due to the bankruptcy. The fraudulent scheme perpetrated by Ward and his coconspirators delayed the foreclosure sales of hundreds of distressed properties by using bankruptcies filed in 26 judicial districts. As part of the scheme, Ward admitted collecting more than $1.2 million from his clients who paid for his illegal foreclosure-delay service, all of which he agreed to forfeit.

Ward also admitted that he worked with Frederic Alan Gladle to perpetrate the foreclosure-rescue fraud. As previously reported, Gladle was charged with and pled guilty to the fraud scheme. On May 3, 2012, Gladle was sentenced to 61 months in Federal prison and ordered to pay $214,259 in restitution and to forfeit $87,901.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the U.S. Attorney’s Office for the Northern District of California, the FBI, and the U.S. Trustee’s Office.

On December 3, 2012, the Consumer Financial Protection Bureau (“CFPB”) filed a civil complaint against National Legal Help Center, Inc. (“NLHC”), its owner, Najia Jalan, and its chief financial officer, Richard K. Nelson, for fraudulently marketing and selling mortgage assistance relief services. CFPB also filed a motion for a temporary restraining order against the defendants. The next day, the U.S. District Court for the Central District of California issued an order freezing the assets of the defendants and appointing a temporary receiver to take control of NLHC.

The CFPB complaint alleges that the defendants falsely promised mortgage assistance relief services to distressed homeowners in exchange for up-front fees. According to the complaint, the defendants used aggressive marketing tactics through websites, direct mail solicitations, spam emails, and telephone calls to collect advance fees ranging from $1,000 to as much as $10,000 from distressed homeowners by falsely promising to obtain foreclosure relief or mortgage modifications that would make the homeowners’ mortgage payments substantially more affordable. The defendants allegedly misled homeowners by, among other things, misrepresenting NLHC as a government agency or as being approved by or affiliated with the government or government programs, including Treasury, the Making Home Affordable (“MHA”) program and the Home Affordable Modification Program (“HAMP”). For example, the defendants posted a website at “makinghomeaffordable.ca” that was allegedly virtually indistinguishable from the Federal government’s official website for the MHA program. The defendants also allegedly falsely claimed that they had special expertise in negotiating with mortgage lenders, that they had proven prior success in obtaining foreclosure relief or mortgage modifications, and that NLHC was a “full-service law firm” with attorneys experienced in providing such services to homeowners.

The defendants allegedly collected at least $1.6 million in advance fees from homeowners since early 2010 but failed to provide any meaningful mortgage assistance relief services to homeowners. The defendants allegedly failed to respond to homeowners’ telephone calls and emails and failed to provide homeowners updates about the status of the defendants’ purported communications with lenders. In addition, the defendants allegedly instructed homeowners to stop contacting their lenders and stop paying their mortgages, without advising the homeowners that they could lose their homes and damage their credit rating by doing so. As a result of the defendants’ alleged fraudulent actions, many homeowners suffered significant economic injury, including a damaged credit rating and the loss of their homes.

The ongoing investigation is being conducted by SIGTARP, CFPB, and the U.S. Attorney’s Office for the Central District of California.

On July 22, 2014, the owners and principals of U.S. Homeowners Relief, of Orange County, California, Samuel Paul Bain, a/k/a “Paul Bain,” Aminullah Sarpas, a/k/a “Amin Sarpas” and “David Sarpas,” as well as Damon Grant Carriger (the company’s principal sales manager), and Louis Saggiani (the company’s manager and chief accountant) were charged in the United States District Court for the Central District of California in connection with a fraudulent mortgage modification scam in which the defendants, through U.S. Homeowners Relief and several related entities, allegedly offered bogus loan modification programs to hundreds of financially distressed homeowners across the United States. As a result of the defendants’ scheme, these distressed homeowner-victims lost millions of dollars and many also lost their homes in subsequent foreclosure proceedings.

SIGTARP agents and their law enforcement partners arrested Sarpas, Carriger, and Saggiani on July 22, 2014. At the time of the indictment, Bain was in state custody. All four defendants are charged with conspiracy, 21 counts of mail fraud, and two counts of wire fraud. Bain, Sarpas, and Saggiani are also charged with an additional five counts of mail fraud and two counts of wire fraud. In addition, Bain is also charged with two counts of money laundering having allegedly routed a total of $60,000 in illicit funds through an account held at TARP recipient Wells Fargo Bank.

According to the indictment, the four defendants operated a series of telemarketing “boiler rooms” that, in exchange for substantial up-front fees, purportedly offered home loan modification services to distressed homeowners in the wake of the 2008 financial crisis and housing market collapse. From late 2008 to early 2010, the defendants operated multiple offices in California under a series of company names, including, among others, Greenleaf Modify, U.S. Homeowners Relief, Waypoint Law Group, and American Lending Review. When pressure from growing customer complaints about the purported scam mounted at the Better Business Bureau or attracted attention from state regulators such as the California Department of Justice, the defendants would shut down, and change each company name. Further, when served with a cease and desist order from the California Department of Real Estate prohibiting the defendants from collecting advance fees, the defendants deliberately ignored the order and continued collecting advanced fees from struggling homeowners in exchange for purported loan modification services.

As alleged in the indictment, the defendants and their associates used a consistent sales pitch throughout the scheme. Their advertising materials and telemarketers convinced struggling homeowners to pay upfront fees ranging from approximately $1,450 to around $4,200 by falsely: (i) promising that the homeowners were highly likely to secure mortgage modification, including a reduced interest rate as low as two percent and/or a reduction of principal; (ii) touting a 97% success rate in securing modifications; and (iii) advertising a complete money-back guarantee, as well as an affiliation with Federal housing support programs. For example, the companies’ marketing materials falsely implied that they were affiliated either with a Government entity or a Government program designed to offer homeowners mortgage debt relief, and sometimes made specific references to actual Government websites such as www.MakingHomeAffordable.gov and displayed official Government logos.

Telemarketers associated with the companies also claimed that the mortgage relief services were part of the “Obama Act.” In addition, to create the false and misleading impression that the defendants’ entities were preparing to negotiate with lenders on the victims’ behalf, the defendants allegedly asserted that one or more of the entities were licensed California real estate brokers and that homeowners’ payments would be placed in a trust account, not to be withdrawn until the loan modification services were in fact performed. The defendants also often claimed that specific attorneys were assigned to work on homeowners’ individual cases.

Finally defendants falsely claimed that, to maximize the likelihood of obtaining a mortgage modification, homeowners should stop making mortgage payments on their existing mortgages and refrain from contacting their lenders. According to the indictment, however, as the defendants well knew, all of these claims were false and/or materially misleading. Despite their promises that homeowners would receive better loan terms, the vast majority of the hundreds of victims received no favorable loan modifications. In fact, several of the victims learned from their mortgage lenders that the defendants’ companies had never made any contact on the homeowners’ behalf. Furthermore, the defendants’ companies were neither affiliated with any Government program, nor were they licensed real estate brokers. In addition, the customers’ funds were generally spent on defendants themselves, payments to sales people and other business expenses, and were not placed in trust accounts as was promised. Attorneys did not give personal attention to individual victims and instead were paid by defendants to write substantially identical form letters to some lenders. With respect to the purported money-back guarantee, the defendants routinely used stalling tactics or just ignored homeowners’ repeated demands for refunds after the homeowners did not receive the promised loan modifications.

The defendants are scheduled for a June 16, 2015, trial. If convicted, each of the defendants faces up to five years in Federal prison for the conspiracy count, as well as 20 years in prison for each of the mail fraud, wire fraud, and (with respect to Bain) money laundering counts.

This case is being investigated by SIGTARP and the U.S. Attorney’s Office for the Central District of California, the United States Postal Inspection Service, and the Internal Revenue Service – Criminal Investigation. This prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On December 10, 2014, Leigh Farrington Fiske, of Tampa, Florida, was sentenced in the United States District Court for the Northern District of California to 37 months in federal prison followed by three years of supervised release, and was ordered to pay restitution of more than $409,000 for a fraud scheme he perpetrated against small business owners and others seeking lines of credit around the nation, and which funneled proceeds through a TARP bank. Also, as a special condition of his supervised release, Fiske is prohibited from acting in a fiduciary capacity.

On June 11, 2014, Leigh Farrington Fiske pled guilty in U.S. District Court for the Northern District of California, to five counts of wire fraud in connection with a $433,000 fraud scheme that funneled proceeds through a TARP bank. At sentencing, Fiske faces up to 20 years in Federal prison, a fine of up to $866,000, and three years of supervised release.

In pleading guilty, Fiske admitted that he and his partner, Michael P. Ramdat, operated a business called “Corporate Funding Solutions,” which purportedly sought to obtain business lines of credit for customers in exchange for a fee. Fiske’s role was to solicit customers, which he generally did over the internet and by word-of-mouth. In reality, however, neither Fiske nor Ramdat ever intended to provide any services to their customers. Instead, they accepted approximately $433,000 from at least 30 victims and never in fact helped any of the victims obtain credit. Fiske admitted that he kept $102,000 of the payments for himself and that he passed the remainder to Ramdat.

On September 16, 2013, and December 2, 2013, respectively, Fiske and Ramdat were arrested by SIGTARP agents and their law enforcement partners. Fiske and Ramdat were indicted by a Federal grand jury on November 21, 2013, and Ramdat pled guilty on February 26, 2014, and is pending sentencing in U.S. District Court for the Northern District of California to conspiracy and multiple counts of wire fraud in connection with the same scheme.

Michael P. Ramdat

On January 21, 2015, Michael P. Ramdat, of Palm Beach, Florida was sentenced in the United States District Court for the Northern District of California to 21 months in federal prison, followed by three years of supervised release, and ordered to pay more than $416,000 in restitution in connection with a fraud scheme he perpetrated against small business owners and others seeking lines of credit around the nation and in which illegal profits were funneled through banks that received TARP funding. Also, as a special condition of his supervised release, Ramdat is prohibited from maintaining a position that involves acting in a fiduciary capacity. On February 26, 2014, Ramdat pled guilty to conspiracy and five counts of wire fraud for his role in the scheme.

According to his plea agreement, Ramdat and Fiske operated a business known as “Corporate Funding Solutions,” the purported purpose of which was to obtain lines of credit for customers in exchange for a fee. Ramdat’s role was to vouch for the legitimacy of the business with victims recruited by Fiske and to provide “customer service” by giving excuses to the victims. In reality, however, neither Fiske nor Ramdat ever intended to provide any services to their customers and, instead, accepted approximately $433,000 from around 30 victims without ever helping any of the victims obtain credit. Ramdat further admitted that he kept more than $200,000 of these payments for himself and that funds obtained through the scheme were routed through TARP recipient banks.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, and the Federal Bureau of Investigation.

On May 21, 2014, an indictment in the U.S. District Court for the Western District of Texas, charged Mark Steven Thompson and his cohorts, Xue Heu, Thomas Dickey Price, and Carla Lee Miller with conspiracy to commit wire fraud and aiding and abetting wire fraud for their alleged participation in a fraud scheme to sell properties allegedly owned by the Government as official “TARP partners.” Thompson was arrested on January 24, 2014. Chan and Price were arrested on May 28, 2014 and, at the time of the indictment, Miller was in county jail in Modesto, California.

According to court documents, from August 2013 through February 2014, Thompson, Heu, Price and Miller allegedly created fake identities in order to contact real estate investment firms and misrepresent that their affiliated companies, Greenfield Advisors, LLC, and Escrow Professionals, Inc., were authorized by TARP to sell U.S. Government-held properties through a legitimate Federal Government program called HomePath. Court documents allege that, through Greenfield Advisors, defendants entered into contracts with individuals purporting to purchase properties from the HomePath program when, in fact, defendants had no authority to enter into such contracts.

As alleged, Price and Miller directed investors to funnel the money – intended as earnest money and property payments – through Escrow Professionals, Inc., the escrow company for the sale, and into bank accounts controlled by Thompson and ultimately used by all of the defendants for their own personal benefit. To further the scheme, a real estate closing would purportedly occur, and, if pressed, Hue would create documents falsely purporting to be the deeds. In reality, however, no actual transfer of properties took place because none of the defendants had the actual authority to sell the property.

Defendants are accused of defrauding victims out of more than $900,000. If convicted, each faces up to 20 years in Federal prison.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Texas, and the Federal Bureau of Investigation.

On January 28, 2014, in U.S. District Court for the District of Connecticut, Winston and Marleen Shillingford, husband and wife, were both sentenced for their roles in a mortgage fraud scheme that defrauded mortgage lenders, including TARP recipient banks. Winston Shillingford was sentenced to four years in Federal prison, followed by three years of supervised release. Marleen Shillingford was sentenced to three years in Federal prison, also to be followed with three years of supervised release. On January 31, 2014, their co-conspirator, Robert Ilunga, was sentenced to Federal prison for one year and six months, followed by three years of supervised release.

All three defendants had previously pled guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering related to their involvement in the mortgage fraud scheme.

From approximately April 2004 through August 2011, the defendants conspired with others in a mortgage fraud and money laundering scheme to obtain false mortgages. Utilizing a real estate company called Waikele Properties Corporation, they and their co-conspirators purchased more than 40 multi-family and vacant properties in Bridgeport, Connecticut, on which they built new houses. The scheme involved recruiting straw purchasers for the properties who then applied for mortgages from banks, including Bank of America and other TARP banks. The defendants and their co-conspirators filed loan applications on behalf of the purchasers that materially misrepresented their employment, income, assets, and liabilities, and provided the banks with false documentation. As a result of the scheme, the defrauded financial institutions suffered more than $7 million in losses.

This case was investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General.

On May 21, 2014, Steven Pitchersky was sentenced to 51 months in Federal prison, to be followed by five years of supervised release after having pled guilty to wire fraud for his role in a fraudulent lending scheme that resulted in approximately $5.3 million in losses to TARP recipient, GMAC Inc. (since rebranded as Ally Financial Inc. (“Ally”). In addition, the U.S. District Court for the Eastern District of Pennsylvania ordered Pitchersky to pay restitution of more than $3.2 million to Ally.

In total, $17.2 billion in Federal taxpayer bailout funds were invested in Ally through TARP. As of June 30, 2014, Treasury owned 15.6% of Ally Financial and $4 billion of the TARP investment remained outstanding.

Pitchersky operated Nationwide Mortgage Concepts (“NMC”), a California mortgage lender licensed in more than 40 states to originate and refinance mortgages. Between August 2009 and January 2011, NMC borrowed from a $10 million line of credit with Ally, NMC’s “warehouse lender” for thousands of mortgage loans, as interim financing so that NMC could refinance home mortgages held by other financial institutions. As part of the agreement to provide the line of credit, Ally retained a security interest in the mortgage loans until the loans were repaid. In most cases, Ally also purchased the NMC refinanced mortgages.

Pitchersky made misrepresentations to Ally both in his application for approval to sell NMC-originated loans to Ally and secure the warehouse line of credit, including that NMC already had a $10 million warehouse line of credit with a company called “MPL.” Pitchersky provided Ally with contact information for MPL. In reality, however, the phone number was actually Pitchersky’s cell phone, and MPL was the name of another business entity that Pitchersky himself ran. Over the next three years, on multiple occasions, Pitchersky falsely represented to Ally that he had a warehouse relationship with this company, MPL.

Pitchersky also repeatedly lied to Ally about how he was using the $10 million warehouse line. Under its warehouse line of credit agreement with Pitchersky, funds provided to NMC were required to go through a third-party title company that would then disburse the funds for each NMC loan financed by Ally. Pitchersky used a company called “Hanover” as the title company on his transactions which, unbeknownst to Ally, Pitchersky himself had created. Then, Pitchersky covertly instructed Hanover to forward to NMC all money it received from Ally, which gave Pitchersky complete control over money from Ally’s warehouse line. As a result, from December 2010 to January 2011, Pitchersky misdirected approximately $5.3 million intended to pay off 23 first mortgages for NMC clients and instead used the money to pay off first mortgages for other customers, allowing him to originate more mortgages and earn more fees for himself.

At the end of January 2011, Ally discovered that Pitchersky and NMC had not used this money to pay off the 23 loans and ended the warehouse agreement with NMC.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, the Federal Bureau of Investigation, and the Department of Veterans Affairs Office of Inspector General.

On June 16, 2011, Robert Egan, former president of the Mount Vernon Money Center (“MVMC”), and Bernard McGarry, former chief operating officer of MVMC, were sentenced by the U.S. District Court for the Southern District of New York to 11 and five years in prison, respectively, and three years of supervised release, for their roles in defrauding banks that had received TARP funds and other MVMC clients. An Order of Forfeiture in the amount of $70 million was also entered by the court. Restitution orders will be determined at a later date.

Egan and McGarry each pled guilty in late 2010 to conspiracy to commit bank fraud and wire fraud. The guilty pleas arose from a scheme in which Egan and McGarry defrauded MVMC clients, including banks that had received TARP funds, universities, and hospitals, out of more than $60 million that had been entrusted to MVMC. MVMC engaged in various cash management businesses, including replenishing cash in more than 5,300 automated teller machines owned by financial institutions. From 2005 through February 2010, Egan and McGarry solicited and collected hundreds of millions of dollars from MVMC’s clients on the false representations that they would not co-mingle clients’ funds or use the funds for purposes other than those specified in the various contracts with their clients. Relying upon the continual influx of funds, Egan and McGarry misappropriated the clients’ funds for their own and MVMC’s use, to cover operating expenses of the MVMC operating entities, to repay prior obligations to clients, or for their own personal enrichment.

This case was jointly investigated by SIGTARP, FBI and the U.S. Attorney’s Office for the Southern District of New York.

On, January 12, 2015, Steven J. Moorhouse, the former president and majority shareholder of Jefsco Manufacturing Co., Inc. (“Jefsco”) of Sandwich, Illinois, pled guilty in United States District Court for the Northern District of Illinois one count of making a false statement to a financial institution in connection with a scheme to defraud TARP recipient Old Second National Bank (“Old Second”) in which Moorhouse allegedly overstated the value of collateral he used to secure loans from Old Second. Moorhouse was charged in May 2013 with four counts of bank fraud and two counts of making a false statement to a financial institution.

According to court documents, in 2009, Old Second required Moorhouse to submit certain financial information in order to obtain two loans. Old Second granted Moorhouse a $1 million loan on the condition that Jefsco pledge its accounts receivable as collateral for the loan. Old Second also required that Jefsco open a deposit account at Old Second and deposit all accounts receivable payments into the account. One of the loans provided by Old Second allowed Moorhouse to borrow a percentage of Jefsco’s inventory and account receivables in the form of cash advances. On December 4, 2012, Moorhouse submitted a false “Borrowing Base Certificate” which he knew falsely inflated the value of Jefsco’s accounts receivable by hundreds of thousands of dollars. Moorhouse also knew that the amount of the loan proceeds Old Second would disburse would be determined, in part, by the misrepresented receivables figures contained in the document. Also, instead of depositing customer payments to an account at Old Second as promised, Moorhouse, with the intent to deceive, fraudulently transferred the payments into an account at another financial institution.

Old Second Bancorp, Inc., the parent company of Old Second, received $73 million in TARP funds in January 2009. During the time it was in TARP, Old Second Bancorp missed ten required dividend payments totaling $9,125,000. Additionally, in March 2013, Treasury sold its stake in Old Second Bancorp at auction at a loss of approximately $47 million of the principal investment, resulting in a total taxpayer loss of $56,577,680.

At sentencing, Moorhouse faces up to 30 years imprisonment. This case is being investigated by SIGTARP and the Federal Bureau of Investigation and is being prosecuted by the United States Attorney’s Office for the Northern District of Illinois in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On January 6, 2015, Ronald Onorato, the Chief Executive Officer, and Larry Milder, the Chief Operating Officer, of The Northpoint Group (“Northpoint”), a construction holding company based in Alpharetta, Georgia, were charged in the United States District Court for the Northern District of Georgia (Gainesville Division), with two counts of bank fraud and one count of conspiracy to commit bank fraud in connection with their scheme to defraud TARP recipient Integra Bank, of Evansville, Indiana, as well as Huntington National Bank (“Huntington National”). On January 16, 2015, Onorato and Milder were arrested by law enforcement. If convicted, Onorato and Milder each face up to 30 years in federal prison for each count.

According to the indictment, in 2007, through a limited liability company, Onorato applied to Integra for a $35,613,000 construction loan to build a seven-story commercial, retail and office building. Because of its size, Integra participated $20 million of the loan to Huntington National. Once approved, in order to obtain loan proceeds, the loan agreement required Onorato and Milder to submit draw requests with supporting invoices for construction work actually performed. Despite this, Onorato and Milder conspired to defraud Integra and Huntington National, by, among other means, submitting false and fraudulent invoices and draw requests for work that had not been performed, including by a contractor who never performed any work for the project. Onorato and Milder took the additional loan proceeds, totaling approximately $1.3 million, for their own personal use. Additionally, in another instance, Onorato and Milder requested and obtained loan proceeds for work that had been completed by a subcontractor. Onorato and Milder, however, did not pay the subcontractor but rather kept the more than $438,000 for themselves.

In February 2009 Integra Bank Corporation, also of Evansville, Indiana, Integra Bank’s parent company, received $83.6 million in TARP funds. During the time it held TARP funds, Integra Bank missed seven dividend payments totaling $7,313,775 owed to the Treasury Department. On July 29, 2011, Integra Bank National Association, the banking subsidiary of Integra Bank Corporation, was closed by the Office of the Comptroller of the Currency, which appointed the FDIC as receiver. This resulted in a loss of the $83.6 million principal TARP investment. Additionally, at the time of Integra Bank’s failure, the FDIC estimated an additional loss of $170.7 million to the FDIC’s deposit insurance fund.

This case is being investigated by SIGTARP and the Federal Bureau of Investigation, and is being prosecuted by the United States Attorney’s Office for the Northern District of Georgia in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On June 11, 2014, Marvin Solis was sentenced in the U.S. District Court for the Northern District of California, to 27 months in Federal prison and ordered to pay restitution for his role in an investment fraud scheme he perpetrated against his family members. In addition, as a special condition of his three-year supervised release, Solis is prohibited from acting in any fiduciary position.

As previously reported, Solis was indicted on September 5, 2013, by a Federal grand jury on two counts of wire fraud as a result of the scheme, and was arrested by SIGTARP agents and our law enforcement partners on September 11, 2013.

Solis pled guilty to both wire fraud counts on January 29, 2014. According to the plea agreement, Solis admitted to defrauding his then-wife’s family members out of approximately $244,000 from September 2008 through March 2009. The fraud consisted of three parts: First, Solis solicited approximately $207,000 from several of his wife’s relatives promising them he would invest in real estate on their behalf. In reality, however, Solis never invested in real estate, rather, Solis used the funds to pay his own expenses and make risky commodities trades running the funds through accounts held at a TARP recipient bank. Second, he encouraged his victims to use their good credit scores and open credit card accounts to fund renovations to the properties he had promised them. Instead, he ran up approximately $10,000 in charges – not related to renovations – on these credit cards at different banks, including a TARP bank. Finally, Solis used the personal information of one of his victims without the victim’s knowledge to open a credit card account in the name of Solis’s company and, again without authorization, charged approximately $26,700 on the card.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, and the Federal Bureau of Investigation.

On December 19, 2013, Edward Shannon Polen was sentenced to 71 months in Federal prison, followed by five years of supervised release, for his role in executing several elaborate Ponzi schemes in which he defrauded investors and several TARP-recipient banks. Previously, Polen pled guilty in December 2012 in Federal court in Nashville, Tennessee, to bank fraud, mail fraud, wire fraud, and money laundering.

From January 2007 through March 2011, Polen executed several Ponzi schemes in which he solicited and ultimately defrauded more than 50 investors of more than $16 million. In one of those schemes, he falsely represented to victim-investors that he needed money to purchase construction equipment that he was going to sell to Tennessee Emergency Management Agency contractors for a significant profit. When confronted with payment demands, Polen provided his victims with post-dated checks drawn on accounts at multiple banks, including F&M Bank, U.S. Bank, and Fifth Third Bank, all which received TARP funds. The checks were drawn from accounts that had been closed or did not have sufficient funds to cover the amounts of the checks. Polen admitted to using investors’ money for his own personal use, including paying off his gambling debts and repaying prior investment victims to keep the scams going.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Tennessee, IRS-CI, the FBI, the Tennessee Valley Authority Office of Inspector General, and the Tennessee Bureau of Investigation.

On October 25, 2013, Joseph D. Wheliss, Jr., the owner and operator of National Embroidery Works, Inc., was sentenced to two years in Federal prison followed by five years of supervised release for his involvement in a scheme to defraud TARP recipient Pinnacle National Bank (“Pinnacle”). Wheliss was also ordered to pay restitution and forfeiture in the amount of $4.8 million.

Wheliss pled guilty in Federal court in Nashville, Tennessee, to bank fraud on October 5, 2012. From approximately 2005 to 2011, Wheliss, a former banking customer of Pinnacle, defrauded Pinnacle by submitting false and forged documents to the bank regarding his finances and assets, causing the bank to give him multiple commercial loans totaling more than $5.6 million. In order to obtain the commercial loans, Wheliss claimed to be the beneficiary of a trust fund that he at one point valued at nearly $20 million, and he pledged this “asset” as collateral for the loans. The trust fund did not exist, and Wheliss was not the beneficiary of such a trust. Pinnacle, a recipient of $95 million in TARP funds, suffered a loss of approximately $4.8 million due to Wheliss’ fraud.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Tennessee, and the FBI.

On January 7, 2013, Brian W. Cutright was sentenced by the U.S. District Court for the District of Nevada for operating a fraudulent mortgage assistance company, Sterling Mutual LLC (“Sterling”). Cutright was sentenced to probation for five years and was ordered to pay $762,143 in restitution to victims.

Cutright pled guilty on October 9, 2012, to one count of mail fraud. Cutright admitted to creating and operating Sterling, a Las Vegas company that falsely claimed to have alliances with private investors and equity funds to purchase mortgages from distressed homeowners. Cutright admitted to causing Sterling to send mass mailing advertisements falsely stating that Sterling worked together with investment groups and hedge funds to make millions of dollars available to assist homeowners with principal reduction programs and to purchase client mortgages from lenders at or below market value. Cutright also admitted that Sterling’s false representations persuaded victims to give money to Sterling for the purpose of obtaining principal reductions; principal reductions that homeowners did not, in fact, receive. A Federal grand jury previously had returned a seven-count indictment against Cutright that included charges that Sterling falsely advertised that the U.S. Treasury’s Public-Private Investment Program (which was implemented under TARP) allowed banks to sell homeowner mortgages to investors at below market value, after which the homeowners could receive a principal reduction of 90% to 100% of the home’s current appraised value by negotiating a lower mortgage principal with the investor and Sterling.

The case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Nevada, the Department of Housing and Urban Development Office of Inspector General, and the U.S. Postal Inspection Service.

On June 28, 2013, Julius C. Blackwelder, the former Bishop of the Church of Jesus Christ of Latter-Day Saints congregation in Trumbull, Connecticut, was sentenced to 46 months in Federal prison followed by three years of supervised release for his role in a Ponzi scheme that defrauded investors. Blackwelder had previously pled guilty to wire fraud and money laundering for his role in the fraud scheme.

Beginning in 2005, Blackwelder solicited victim-investors, including members of his congregation, to invest money with him by misrepresenting himself as an experienced and successful investor and falsely assuring them that their funds would be invested in safe investments. In some instances, Blackwelder also guaranteed the victim-investors their principal and a specific return on their investment. Blackwelder used investor money to pay earlier investors in the scheme, to build a 7,000 square-foot waterfront home for himself, and to repay personal bank loans, including a line of credit from TARP-recipient Bank of America. Blackwelder admitted that he failed to invest victim funds as represented and lied to reassure a victim about the safety of his investment and to delay repaying the victim. Through this scheme, Blackwelder defrauded investors of nearly $500,000.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, USPIS, IRS-CI, and the State of Connecticut Department of Banking.

On March 18, 2013, John Farahi was sentenced to 120 months in Federal prison followed by three years of supervised release for his role in a fraudulent $20 million Ponzi scheme perpetrated through his investment firm New Point Financial Services, Inc. (“New Point”). Farahi was also ordered to pay more than $24 million in restitution to victims.

Farahi pled guilty on June 4, 2012, to running a Ponzi scheme through New Point from 2005 through 2009. Farahi admitted to convincing potential investors to invest in the corporate bonds of companies backed by TARP and other Federal Government programs, indicating that the investors risked losing their money only if the U.S. Government failed. Many of the defrauded investors were members of the Iranian-Jewish community who listened to Farahi’s daily Farsi-language investment radio show. Farahi admitted that he used investor money to support his lavish lifestyle, to make payments to previous New Point investors in order to perpetuate the Ponzi scheme, and to finance and cover trading losses on speculative options trades. Facing massive trading losses at the end of 2008, Farahi borrowed millions of dollars from TARP recipients Bank of America and U.S. Bank (and other banks) by providing false financial information to these banks.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation (“FBI”).

David Tamman

On September 23, 2013, David Tamman, a lawyer who was a partner at the Nixon Peabody law firm, was sentenced to seven years in Federal prison followed by three years of supervised release and was ordered to pay a $2,500 fine for his role in obstructing two separate investigations into a fraudulent $22 million Ponzi scheme. Tamman was also suspended from practicing law by the state bar of California and has been banned from appearing before the SEC.

On November 13, 2012, after a two-week criminal trial in Federal court in Los Angeles, California, Tamman was convicted of 10 counts relating to his role in the Ponzi scheme perpetrated by his client, New Point Financial Services, Inc., (“New Point”) and its owner, John Farahi. Tamman was convicted of conspiring with Farahi to obstruct the SEC’s investigation into Farahi’s illegal Ponzi scheme by (i) altering, creating, and backdating documents to make it falsely appear to the SEC that Farahi and New Point had made all the necessary disclosures to investors and that Farahi had properly transferred investor funds to his personal accounts and (ii) aiding and abetting Farahi in providing misleading and evasive testimony under oath to the SEC. Tamman also was convicted of being an accessory after the fact to Farahi’s mail and securities fraud crimes. At Tamman’s sentencing hearing, the court found that Tamman additionally altered documents that caused the National Association of Securities Dealers (now known as FINRA) to close an investigation, lied to federal investigators, gave false testimony at trial, and lied to a probation officer who was preparing a pre-sentence report after he was found guilty.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the FBI.

This quarter, SIGTARP decided to take a 360-degree approach to combating and stopping mortgage modification fraud. In addition to investigations and criminal charges, SIGTARP actively worked to shut down hundreds of these scams advertised on the Internet and formed a joint task force to raise homeowner awareness of these scams. SIGTARP will continue to investigate and hold accountable criminals who defraud homeowners in connection with HAMP, while doing everything it can to stop homeowners from becoming victims in the first place.

The first place many homeowners turn for help in lowering their mortgage payment is the Internet through online search engines, and that is precisely where they are being targeted. From talking to the victims of these scams, SIGTARP learned that many were enticed by web banner ads and online search advertisements that promised, for a fee, to help lower mortgage payments. These ads offer a false sense of hope that can end up costing homeowners their homes.

In November 2011, SIGTARP shut down 125 websites that were advertised on Yahoo!, Bing, and Google and evidenced hallmarks of these fraudulent scams. SIGTARP coordinated with Google and Microsoft (which founded Bing and whose technology powers Yahoo!) to shut down the websites. In addition, Google suspended advertising relationships with more than 500 Internet advertisers and agents and Microsoft suspended advertising relationships with more than 400 Internet advertisers and agents connected with the 125 websites.

SIGTARP’s work in cutting off this primary access to homeowners immediately and dramatically decreases the scope and scale of these scams by limiting their ability to seek out and victimize struggling homeowners. This SIGTARP investigation is ongoing.

The initial version of this description contained data compiled and provided by the U.S. Department of Justice pertaining to the results of the Distressed Homeowner Initiative during Fiscal Year 2012. That data was later found to be incorrect. This description has been updated to reflect a recalculation of the data by the Justice Department. To view the original source of the information, view the Justice Department press release and disclaimer located here.

A subsequent review of the reported cases by the Justice Department concluded that the original figures included in the Distressed Homeowner Initiative included not only criminal defendants who had been charged in Fiscal Year 2012, as reported, but also a number of defendants who were the subject of other prosecutorial actions – such as a conviction or sentence – in Fiscal Year 2012. In addition, the announcement included a number of defendants who were charged in mortgage fraud cases in which the victim(s) did not fit the narrow definition of distressed homeowner that the initiative targeted.

On October 9, 2012, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, the FBI and the Federal Trade Commission announced the results of the Distressed Homeowner Initiative, the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners. The yearlong initiative, launched by the FBI, a co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, and supported by SIGTARP, resulted in 107 criminal defendants charged in U.S. District Courts across the country. These cases involved more than 17,185 homeowner victims, and the total loss by those victims is estimated by law enforcement at more than $95 million.

From October 1, 2011, to September 30, 2012, the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments. Typically, the con artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage or by transferring title in the home to persons in league with the scammer. In the end, the homeowner can lose everything. Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after false promises that they would negotiate more favorable mortgage terms on behalf of the homeowners. Additionally, SIGTARP and the Department of the Treasury (“Treasury”), in order to protect homeowners from fraudulent or confusing websites that misuse the Treasury seal and key TARP housing program names such as the Home Affordable Modification Program (“HAMP”), shut down or forced into compliance more than 900 mortgage rescue websites or web advertisers.

SIGTARP, the Consumer Financial Protection Bureau, and Treasury have also established a task force to combat mortgage modification scams exploiting HAMP and to raise public awareness of the scams. The task force has issued two consumer fraud alerts, one specifically offering resources for U.S. servicemembers, that offer tips on how to identify and avoid mortgage modification scams. These alerts are reproduced in the back of this report.

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On October 7, 2014, Phillip Owen, of Selma, Alabama, a former branch manager at a subsidiary of TARP recipient Superior Bancorp, Inc., was sentenced in the U.S. District Court for the Northern District of Alabama to six months in federal prison, followed by five years of supervised release which includes, as a special condition, six months of community confinement, and was ordered to pay $217,540 in restitution after pleading guilty on March 26, 2014, to one count of conspiracy to commit bank fraud in connection with his role in a loan fraud scheme.

According to court documents, Owen was employed by Superior Financial Services (“Superior”) as a branch manager in Attalla, Alabama. From September 2007 to May 2009, Owen approved and recommended the approval of loan applications from bank customers that he knew contained false information. For instance, Owen overvalued vehicles that were the subject of loan applications, disbursed loan proceeds to individuals not entitled to such disbursement or even involved in the loan transaction, and prematurely released collateral securing loans. In exchange for approving the fraudulent loans, Owen was compensated with narcotics.

Ultimately, through these actions, Owen caused the bank to issue loans to customers who would not otherwise qualify and in amounts that exceeded the value of the collateral being pledged. As a result of the scheme, Superior was forced to write off more than $217,000 in bad loans.

In December 2008, Superior Bancorp Inc. (“Superior Bancorp”), of Birmingham, Alabama, the parent company of Superior Bank and Superior Financial Services, received $69 million in federal taxpayer funds through TARP.

In April 2011, following the bankruptcy of Superior Bancorp, Superior Bank was closed by its regulator and put into receivership with the Federal Deposit Insurance Commission (“FDIC”). The TARP funds were never repaid and Treasury is expected to lose the entirety of its $69 million investment as well as more than $2.5 million in missed dividend and interest payments while the funds were outstanding. At the time Superior was closed, the FDIC estimated that it would suffer losses of $259.6 million.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Alabama, and the Federal Bureau of Investigation. The prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On April 10, 2012, Howard R. Shmuckler pled guilty in the U.S. District Court for the Eastern District of Virginia to wire fraud relating to his ownership and operation of a fraudulent mortgage modification business known as The Shmuckler Group, LLC (“TSG”). Shmuckler admitted to falsely portraying himself to TSG clients as an attorney licensed to practice in Virginia and to misrepresenting to clients that TSG’s loan modification success rate was 97%. Shmuckler also assured clients that their loans would be successfully modified. False representations by Shmuckler and TSG employees induced homeowners to pay TSG fees ranging from $2,500 to $25,000. Court records indicate that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG never facilitated a modification of the mortgages referenced in the statement of facts admitted to by Shmuckler. On June 25, 2012, Shmuckler was sentenced to 90 months in Federal prison, a sentence that will run consecutive to his current term of imprisonment that resulted from a conviction in the U.S. District Court for the District of Columbia. Restitution to FDIC will be set by the court at a later date.

On November 18, 2010, the Prince George’s County State’s Attorney’s Office in Maryland obtained a 30-count indictment against Shmuckler for conspiracy, theft, and operating a business without a license, in connection with a mortgage modification scam. On February 3, 2012, Shmuckler appeared before a judge in the Circuit Court for Prince George’s County, Maryland, where he waived his right to a jury trial and consented to certain facts in connection with the mortgage modification scam. At the next hearing, which had been postponed pending Shmuckler’s sentencing by the Eastern District of Virginia, the Maryland judge will rule on the charge. Shmuckler faces a maximum sentence of 15 years on the theft charge.

The case brought in Federal court in Virginia resulted from a joint investigation conducted by SIGTARP, the FBI, FDIC OIG, and the U.S. Attorney’s Office for the Eastern District of Virginia. The case brought in state court in Maryland resulted from a joint investigation by SIGTARP, the Office of the State’s Attorney for Prince George’s County, and the Maryland Department of Labor Licensing and Regulation’s Financial Regulation Division.

On August 22, 2014, in the United States District Court for the District of Massachusetts, Christopher S. Godfrey, Dennis Fischer, Vernell Burris, Jr., and Brian M. Kelly, president, vice president, primary telemarketer trainer, and chief telemarketer (and telemarketer trainer), respectively, of Home Owners Protection Economics (“HOPE”) were, together, ordered to pay more than $110,000 in restitution to approximately 180 victims for their roles in defrauding numerous distressed homeowners in a nationwide $4 million mortgage modification scam through HOPE. The restitution order follows the February 2014 sentencing of Godfrey and Fischer, each of whom received a seven-year prison term followed by three years of supervised release for their leading roles in the scheme. In November 2013, following a two-week trial, a Federal jury convicted Godfrey and Fischer of one count of conspiracy, eight counts of wire fraud, eight counts of mail fraud, and one count of misuse of a Government seal. Also in February 2014, Burris was sentenced to one year and one day in Federal prison, followed by two years of supervised release, after pleading guilty to conspiracy and wire fraud for his role in the mortgage modification scam.

In August 2011, SIGTARP agents, and their law enforcement partners, arrested Godfrey, Fischer, Burris, and Kelly. On April 24, 2014, after pleading guilty to one count of conspiracy, nine counts of wire fraud, and nine counts of mail fraud, Kelly was sentenced to one year and one day in Federal prison to be followed by three years of supervised release, and a $1,900 penalty.

Through a series of misrepresentations, HOPE (through Godfrey, Fischer, Burris and Kelly) induced thousands of financially distressed homeowners to pay up-front fees of up to $2,000 each in exchange for home loan modifications, modification services, and “software licenses.” In exchange for the fee, HOPE sent homeowners a “do-it-yourself” application package that was nearly identical to the U.S. Government’s free application through the Home Affordable Modification Program (“HAMP”), a Federally funded mortgage assistance program implemented under TARP. HOPE falsely represented to homeowners that, with HOPE’s assistance, the homeowners were virtually guaranteed to receive a loan modification under HAMP. For example, the defendants lulled these distressed homeowners by routinely telling the homeowners that they had already been approved for a loan modification, that the defendants were “underwriters” or were otherwise affiliated with the homeowners’ mortgage companies, and that HOPE had an almost perfect record of obtaining home loan modifications. In actuality, however, HOPE customers had no advantage in the applications process and most of their applications were denied. Through these misrepresentations, HOPE was able to persuade numerous homeowners to pay more than $4 million collectively in fees to HOPE. Victims of HOPE lived in all 50 states and Washington, DC.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Massachusetts, and the Computer Crime and Intellectual Property Section of the U.S. Department of Justice’s Criminal Division.

On September 10, 2014, in the U.S. District Court for the District of New Jersey, Jose Luis Salguero Bedoya, a/k/a Jose Salguero, pled guilty to one count of conspiracy to commit wire fraud affecting a financial institution in connection with a long-running, large-scale mortgage fraud scheme that caused millions of dollars of losses.

According to court documents, from March 2008 through July 2012, Salguero, a real estate investor who owned two New Jersey-based real estate companies, and his co-defendants conspired to submit fraudulent mortgage loan applications and related documents to lenders, including TARP recipient banks, in order to obtain loan proceeds which they used to enrich themselves. Specifically, Salguero admitted that he and his co-defendants perpetrated the scheme by, among other means:

Negotiating fraudulent “short sale transactions” by intentionally misrepresenting who was purchasing the properties, and the sources and distributions of funds, and intentionally failing to file deeds after the short sales were arranged to conceal the transactions from the following mortgage lender

Obtaining false appraisal reports from a co-conspirator, Paul Chemidlin, Jr., who was not a licensed appraiser, to support inflated property values for mortgage loans in larger amounts

Obtaining mortgage loans through fake or “straw” buyers. Salguero also paid his co-conspirators for their roles, using his real estate companies to disburse fraudulently obtained funds

At sentencing, Salguero faces up to thirty years in Federal prison. Further, as part of his plea agreement, Salguero agreed to make full restitution for all losses resulting from the scheme (jointly with his co-defendants), and to forfeit assets, including a Florida home in a gated community and other Florida property, six New Jersey homes, and over $35,000 in life insurance benefits.

On January 23, 2013, as part of a wide-scale mortgage fraud investigation in New Jersey, Salguero and ten other individuals were arrested by SIGTARP agents and their law enforcement partners and charged with conspiracy to commit bank fraud relating to their roles in fraudulent mortgage schemes. In addition to Salguero, those arrested were: Christopher Woods, Matthew Amento, Carmine Fusco, Kenneth Sweetman, Joseph Divalli, Paul Chemidlin, Jr., Delio Countinho, Christopher Ju, Yazmin Soto-Cruz, and Jose Martins.

This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation, the United States Postal Inspection Service, and the Department of Housing and Urban Development Office of Inspector General as part of the New Jersey Mortgage Fraud Task Force.

On December 18, 2014, Joseph DiValli, of Jackson, New Jersey, was charged in the United States District Court for the District of New Jersey with one count of conspiracy and six counts of wire fraud for his role in a large-scale mortgage fraud scheme that caused millions of dollars in losses. At sentencing, DiValli faces a maximum of 30 years in federal prison for each count.

According to court documents, from at least March 2011 through November 2012, DiValli and his co-defendants allegedly conspired to submit fraudulent mortgage loan applications and related documents to financial institutions, including TARP recipient banks, on behalf of “straw buyers” who DiValli and his co-conspirators recruited in order to obtain loan proceeds when the mortgage loans were funded. Specifically, DiValli and his co-conspirators allegedly perpetrated the scheme by, among other means:

Submitting fake gift letters falsely stating that a straw buyer was obtaining funds necessary to close from a relative or friend in the form of a gift; in actuality, however, on or before closing, DiValli and his co-conspirators engaged in a series of financial transactions designed to disguise the origin of the supposed gift

Using co-conspirator, Jose Martins, another bank employee, to create misleading certifications that certain bank accounts contain a specific amount of funds when, in actuality, they contained less

Directing another co-conspirator, Paul Chemdilin, Jr., to create false appraisal reports to satisfy Federal Housing Administration (“FHA”) regulations even though Chemdilin was not in fact a licensed appraiser

In some instances, back-dating deeds to make sales of properties appear to have occurred more than 90 days prior to the transaction, ensuring that the properties qualified for financing under the FHA

DiValli enriched himself and co-conspirators by disbursing the proceeds of the fraudulently obtained loans, and DiValli also received money from a co-conspirator. In addition, the indictment also charges DiValli with wire fraud involving a modification of a mortgage on his personal residence. As alleged, from as early as March 2011, DiValli caused a loan officer at a mortgage brokerage company to send payroll ledgers and earnings statements from DiValli’s employer that falsely understated his earnings in order to fraudulently secure the modification.

On January 23, 2013, as part of a wide-scale mortgage fraud investigation in New Jersey, DiValli and 10 other individuals were arrested, including by SIGTARP agents and its law enforcement partners, and charged with conspiracy to commit bank fraud relating to their roles in fraudulent mortgage schemes. In addition to DiValli, those arrested were: Christopher Woods, Matthew Amento, Carmine Fusco, Kenneth Sweetman, Jose Luis Salguero Bedoya, Chemidlin, Delio Countinho, Christopher Ju, Yazmin Soto-Cruz, and Martins.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of New Jersey, the Federal Bureau of Investigation (Newark Mortgage Fraud Task Force), the Federal Housing Finance Agency Office of the Inspector General, Internal Revenue Service - Criminal Investigation, the U.S. Postal Inspection Service, the U.S. Housing and Urban Development Office of Inspector General, and the Hudson County Prosecutor’s Office. This case is being prosecuted in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On February 2, 2012, Lori J. Macakanja was sentenced by the U.S. District Court for the Western District of New York to 72 months in prison and ordered to pay restitution of $298,639, for orchestrating a scheme to defraud struggling homeowners seeking mortgage modifications. Macakanja had been charged in a criminal complaint filed on January 29, 2011, and she pled guilty to mail fraud and theft of government money on October 6, 2011.

Macakanja was formerly employed as a housing counselor by HomeFront, Inc. (“HomeFront”), a HUD-approved housing counseling agency in Buffalo, New York. Macakanja abused her position of trust by unlawfully soliciting and collecting money from HomeFront clients by falsely claiming that the money would be used to prevent foreclosure on the clients’ homes by obtaining loan modifications, including modifications under HAMP. Instead, Macakanja misused the client funds to gamble at casinos and to pay her own mortgage.

Macakanja failed to obtain loan modifications for the victims. A total of 136 HomeFront clients were defrauded with losses totaling $300,000.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of New York, the U.S. Postal Inspection Service (“USPIS”), HUD OIG, IRS-CI, Secret Service, and the FBI.

The State Bar Court of California (“California Bar”) has disciplined Gregory Flahive and Cynthia Flahive for their roles in perpetrating a fraudulent home loan modification scam through the Flahive Law Corporation (“FLC”), a law firm operated by the Flahives. The Flahives each stipulated to multiple counts of misconduct in connection with the provision of loan modification services to homeowners. Effective July 5, 2012, Cynthia Flahive will serve a 60 day bar suspension while on a two year bar probation and effective August 11, 2012, Gregory Flahive will serve a three year bar suspension while on a five year bar probation. The California Bar also ordered both Flahives to pay restitution to their victims.

Gregory and Cynthia Flahive and Michael Johnson, FLC’s former managing attorney, were arrested by SIGTARP agents and its law enforcement partners on March 8, 2012, pursuant to an indictment returned by a California grand jury. According to the indictment and court documents, from January 2009 to December 2010, FLC promoted its loan modification services to homeowners through advertisements, including a television infomercial. FLC falsely represented that experienced lawyers would negotiate with banks on behalf of homeowners seeking modifications, including under HAMP, misrepresented that FLC’s law firm status would give them extra leverage when negotiating with such banks, and overstated FLC’s rate of success in obtaining loan modifications on behalf of homeowners. FLC allegedly collected up-front fees of up to $2,500 from homeowners for loan modification services that were never performed.

On May 16, 2012, in response to the criminal charges, Johnson entered a plea of no contest to misdemeanor conspiracy for his participation in the fraud and was ordered by a California criminal court to serve three years of probation, pay restitution to victims, and to not participate in loan modification services. A California Bar disciplinary proceeding against Johnson is pending.

In March 2010, SIGTARP, along with USPIS, FBI, ICE, and the Orange County District Attorney’s Office, executed a publicly filed search warrant obtained by the U.S. Attorney for the Central District of California at the offices of United Law Group (“ULG”). This investigation focuses on allegations that ULG, taking advantage of the publicity surrounding HAMP, engaged in a mortgage modification advance-fee scheme. The search warrant affidavit alleges that ULG charged struggling homeowners fees ranging from $1,500 to $12,000 without performing services, while advising victims to stop paying their mortgages and terminate contact with their lenders. The affidavit further alleges that many ULG customers subsequently lost their homes to foreclosure.

On June 30, 2010, ULG filed for bankruptcy protection. On December 20, 2010, as a direct result of SIGTARP’s investigative efforts, the Honorable Robert Kwan issued a preliminary injunction assigning control of a bank account held by ULG containing client funds to ULG’s bankruptcy trustee. The bankruptcy trustee assigned to wind down the operations of ULG in Irvine, California, estimates that approximately $1 million from the seized account will be returned to the estate to serve as restitution to victims.

On February 14, 2012, Ziad al Saffar, Sara Beth Rosengrant, and Daniel al Saffar pled guilty to charges of conspiracy to commit wire fraud and mail fraud for their roles in operating a fraudulent mortgage loan modification business under the names Compliance Audit Solutions, Inc. (“CAS”) and CAS Group, Inc. (“CAS Group”). On July 20, 2012, all three defendants were sentenced by the U.S. District Court for the Southern District of California. Ziad al Saffar was sentenced to 21 months in Federal prison, followed by three years of supervised release, and ordered to pay $270,417 in restitution to victims. Sara Beth Rosengrant was sentenced to 12 months of home detention as part of a three-year probation term, and ordered to pay $101,068 in restitution to victims. Daniel al Saffar was sentenced to six months of home detention as part of a three-year probation term, and ordered to perform 600 hours of community service and pay $46,757 in restitution to victims.

The defendants admitted targeting homeowners who were unable to afford their mortgage payments and using fraudulent tactics to induce the homeowners to purchase an “audit” of their home mortgage loan. The defendants claimed the “audit,” for which they charged homeowners between $995 and $3,500, could identify “violations” in the homeowners’ loan documents that could be used to force banks to negotiate new terms for the loans. The defendants admitted to publishing numerous misrepresentations in advertisements, including claiming that the defendants were affiliated with or employed by the United States Department of Housing and Urban Development, and that CAS and CAS Group were participating in a Federal Government program called “Hope for Homeowners.” The defendants also used websites named www.obama4homeowners.com and www.hampnow.org, which implied affiliation with HAMP, the housing support program funded by TARP.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of California and the FBI.

On March 20, 2014, Isaak Khafizov, the former owner of American Home Recovery (“AHR”), was sentenced to nine years in Federal prison followed by three years of supervised release for operating a mortgage modification scheme that defrauded hundreds of struggling homeowners and their lenders. Khavizov was also required to pay $399,999 in both forfeiture and restitution to his victims.

Following a 10-day jury trial in U.S. District Court for the Southern District of New York, Khafizov was found guilty in May 2012 of conspiracy, mail fraud and wire fraud for perpetrating a scheme to defraud distressed homeowners and lenders. Khafizov founded AHR, a New York-based mortgage modification loan business, in the spring of 2008. He and AHR salespeople made fraudulent assertions to induce distressed homeowners to pay AHR thousands of dollars in up-front fees for mortgage modifications. Specifically, Khafizov and AHR informed homeowners that: they had been “pre-approved” for a mortgage modification by their lenders; AHR would ensure participation in the TARP-funded Making Home Affordable program; and AHR could obtain better interest rates and lower monthly fees on their mortgage. Khafizov and AHR falsely promised to return the up-front fees if AHR did not secure a mortgage modification desired by the homeowner. Khafizov and AHR also falsely claimed that: AHR was affiliated with Government agencies and programs established by the Emergency Economic Stabilization Act of 2008; AHR possessed unique expertise in mortgage modifications; and AHR had special relationships with lenders. Khafizov also directed distressed homeowners to stop paying their mortgages and to instead pay fees to AHR. After receiving up-front fees from the distressed homeowners, Khafizov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. As a result, many AHR clients lost their homes in foreclosure by lenders and hundreds of thousands of dollars in up-front fees.

JIn addition to Khafizov, AHR was also founded by Jaime Cassuto and David Cassuto. Each entered a guilty plea on April 2, 2012, relating to this mortgage modification scheme and are awaiting sentencing. In March 2011, Raymond Pampillonio, a former AHR employee, also pled guilty in connection with this scheme and is awaiting sentencing.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Bureau of Investigation.

On September 13, 2013, Mark S. Farhood and Jason S. Sant were sentenced to Federal prison for their roles in operating a nationwide online foreclosure rescue scam that went by various names, including Home Advocate Trustees (“HAT”) and Walk Away Today, and used various websites, including walkawaytoday.org and seefastusa.com, to deceive hundreds of vulnerable, distressed homeowners into surrendering their properties to the company. Farhood was sentenced to 11 years in prison, followed by three years of supervised release. Sant was sentenced to six years in prison, followed by two years of supervised release. Farhood and Sant were both barred from working in the real estate industry as part of their supervised release. Farhood was ordered to forfeit his interest in real property located in Costa Rica as well as his interest in several Peruvian businesses. The defendants were ordered to forfeit approximately $2 million in fraud proceeds as well as their interests in several bank accounts, silver coins and bars, and other assets.

Farhood and Sant each pled guilty in May 2013 to conspiracy to commit wire fraud, wire fraud, and bank fraud in Federal court in Alexandria, Virginia. Farhood and Sant, co-owners and operators of HAT, admitted that they and their co-conspirators used their website walkawaytoday.org and other websites to fraudulently represent to hundreds of distressed homeowners that they could walk away from their homes and their mortgages without negative effect to their credit by selling their homes to HAT for a nominal fee. Farhood and Sant further admitted that, in order to obtain possession of the distressed homes, they executed quitclaim deeds in favor of HAT and sent the distressed homeowners fraudulent closing documents. The homeowners then stopped paying their mortgages and left their homes in the mistaken belief that they had sold their homes to HAT. Once HAT took possession of the homes, Farhood and Sant admitted to leasing the properties and collecting all rent and security deposit payments for their own personal use. When lenders began foreclosure proceedings on the distressed properties, Farhood and Sant delayed the foreclosure process by submitting to the lenders fraudulent HAMP applications. Through these misrepresentations, HAT fraudulently obtained more than $2.8 million.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Virginia, and the FBI.

On March 5, 2015, Angel Gonzalez, of Rosedale, New York, a sales manager for various mortgage modification companies, pled guilty in the United States District Court for the Southern District of New York to conspiracy to commit wire fraud and wire fraud in connection with operating a massive mortgage modification scheme that defrauded hundreds of victims out of millions of dollars. Gonzalez was charged in October 2013 together with four co-defendants.

According to court documents, Gonzalez admitted that between January 2009 and June 2011, he and the other defendants operated several companies that falsely promised to help financially struggling homeowners refinance their mortgages for lower interest rates and monthly payments after the homeowners had paid upfront fees of thousands of dollars. The defendants enticed homeowners to pay advanced fees by making numerous false statements through advertisements, websites, promotional letters and direct conversations. Those misrepresentations included, among others:

The defendants’ companies were associated with the Home Affordable Modification Program, “HAMP,” a TARP-funded official U.S. government mortgage relief program

A mortgage modification was guaranteed and would only take 30 to 60 days

Mortgage payments submitted to defendants could “assist” with the modification approval process

Homeowners’ fees would be refunded in the event defendants could not modify the homeowners’ loan

Furthermore, defendants also altered customer financial information used by an online service to determine eligibility for HAMP modifications which caused false modification approvals to be generated and lulled customers into believing work was actually being done on their behalf. Customers who received those approvals erroneously believed that they were eligible for a home loan modification. In reality, after receiving the upfront fees, defendants did nothing and instead used the funds for the own personal use. The defendants’ companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

At sentencing, which has been scheduled for September 17, 2015, Gonzalez faces a maximum of 30 years in federal prison for each count.

On October 23, 2013, in addition to Gonzalez, Guy Samuel, of Richmond Hill, New York; Anthony Blackwell, of New York, New York; Aren Goldfaden, of East Rockaway, New York; and Jonathan Lyons, of Rockville Center, New York, were charged for their roles in the scheme. Additionally, on October 16, 2013, Scott Schreiber, of Brooklyn, New York, pled guilty to conspiracy to commit wire fraud and wire fraud, and, on September 19, 2013, Darrell Keys, of Uniondale, New York, pled guilty to conspiracy to commit wire fraud in connection with their roles in the scheme.

This case is being investigated by SIGTARP and the Federal Bureau of Investigation. It is being prosecuted by the United States Attorney’s Office for the Southern District of New York in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

As part of an ongoing wide-scale mortgage fraud investigation in New Jersey, described below, 11 individuals have been arrested, including two individuals who have since pled guilty, by SIGTARP agents and its law enforcement partners and charged with conspiracy to commit bank fraud relating to their roles in fraudulent mortgage schemes. Those arrested were: Christopher Woods, Matthew Amento, Carmine Fusco, Kenneth Sweetman, Joseph Divalli, Paul Chemidlin, Jr., Delio Countinho, Christopher Ju, Jose Luis Salguero Bedoya, Yazmin Soto-Cruz, and Jose Martins.

Two Individuals Plead Guilty to Wire Fraud in $5 Million Scheme

Previously, in 2012, Matthew Amento and Christopher Woods pled guilty in Federal court to wire fraud charges in connection with their roles in a fraud scheme running from March 2008 through February 2010 that resulted in significant loses by mortgage lenders, including TARP-recipient banks Bank of America and Wells Fargo.

Amento and Woods admitted to recruiting straw borrowers to buy residential properties located in New Jersey and submitting fraudulent loan applications to lenders along with false supporting financial information, including financial documents that were altered to reflect inflated income and asset amounts for the applicants. In addition, Amento and Woods caused others to create and submit to lenders inaccurate loan settlement statements that showed fake liens on the subject property purportedly owned by entities controlled by Amento and Woods. After the lenders approved these loans, Amento and Woods caused loan proceeds to be transferred to bank accounts they controlled, to pay off liens purportedly owned by entities they controlled. According to documents filed in court, this scheme caused lenders, including the TARP-recipient banks, to suffer losses totaling approximately $5 million.

Amento and Woods are scheduled to be sentenced on November 22, 2013. At sentencing, each faces a maximum of 40 years in Federal prison.

According to the charges, from March 2008 to July 2012, the defendants engaged in multiple mortgage fraud conspiracies targeting at least 15 properties in New Jersey. The defendants’ alleged mortgage frauds took several forms, including obtaining control of properties through fraudulent “short sale” transactions, short sale flips, and identity theft. They submitted materially false mortgage loan documents to lenders, including TARP recipient banks, in order to obtain loan proceeds, which the defendants then used for their own financial gain. The defendants also obtained money through various sales to straw buyers.

These ongoing cases are being investigated by SIGTARP, the U.S. Attorney’s Office for the District of New Jersey, the FBI, the United States Postal Investigation Services (“USPIS”), and the Department of Housing and Urban Development Office of Inspector General as part of the New Jersey Mortgage Fraud Task Force.

On December 5, 2014, Walter Bruce Harrell, of Montara, California, was sentenced in the U.S. District Court for the Northern District of California to an additional eight months in federal prison after failing to surrender in January 2014 to serve his 10-month prison sentence involving his earlier guilty plea to bankruptcy fraud and false statements in a bankruptcy proceeding. His prison sentences will be followed by a three-year supervised release period.

In February 2013, Harrell was arrested after being charged with eight counts of bankruptcy fraud and two counts of making false statements in a bankruptcy proceeding. In August 2013, Harrell pled guilty, and, on November 26, 2013, was sentenced to 10 months in federal prison. As a result of the November 2013 sentencing, Harrell was ordered by the U.S. District Court Judge to surrender himself on January 31, 2014, however, he failed to do so. Harrell was arrested again on March 20, 2014, and, on June 27, 2014, pled guilty to charges in a separate indictment involving the failure to surrender and contempt of court. Since his March 2014 arrest, Harrell has been serving the initial 10-month sentence.

According to court documents, Harrell’s scheme preyed on homeowners facing foreclosure and involved an abuse of the bankruptcy courts. Specifically, in exchange for a fee, Harrell would offer to postpone foreclosure proceedings on the homeowner’s property. Harrell was able to postpone foreclosure proceedings by instructing his homeowner clients to deed fractional interests in their properties to other individuals whom Harrell would pay to file bankruptcy petitions in U.S. Bankruptcy Court. Once the bankruptcy petitions were filed, Harrell would notify creditors—which included multiple TARP banks—seeking to foreclose on his clients’ properties, that the properties were part of an active bankruptcy proceeding. Because of the “automatic stay” provisions of the U.S. Bankruptcy Code, these creditors were prevented from proceeding with foreclosure on the properties. Instead, the creditors were required to litigate, filing motions to lift the automatic stays in Bankruptcy Court. Although these motions were invariably granted, Harrell’s actions caused delays in the foreclosure process and caused the creditors to incur costs to lift the automatic stays.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Bureau of Investigation, and the Alameda County District Attorney’s Office, with assistance from the United States Bankruptcy Trustee. The prosecution was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force.

On April 22, 2014, Delio Coutinho, a former loan officer at a northern New Jersey mortgage brokerage company, pled guilty in the U.S. District Court in Newark, New Jersey to a criminal information charging him with conspiracy to commit wire fraud for his role in a large-scale mortgage fraud scheme that caused millions of dollars of losses. As part of his plea, Coutinho also agreed to make full restitution for the losses resulting from the conspiracy. At sentencing, Coutinho faces up to 30 years in Federal prison.

According to court documents, from March 2008 through June 2012, Coutinho and his co-defendants conspired to release liens on encumbered properties via fraudulently arranged short sale transactions by concealing the identity of the buyer who was actually a co-conspirator and the source of funds. A few months after completing the fake short sales, Coutinho and his co-defendants submitted false loan applications, including fake employment records and altered bank account statements, to other mortgage lenders, including TARP banks, in order to obtain new mortgages on the same properties. Coutinho and his codefendants profited from the scheme—in all, approximately $2 million in illegal mortgage proceeds—by disbursing the new mortgage proceeds to themselves.

This case is being investigated by SIGTARP, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, the Federal Housing Finance Agency Office of Inspector General, the Internal Revenue Service – Criminal Investigation, and the Prosecutor’s Office for Hudson County, New Jersey.

On May 22, 2014, Michael Edward Filmore, who operated a medical equipment sales firm, was sentenced to four years in Federal prison to be followed by three years of supervised release for carrying out a multi-year fraud scheme against TARP recipient, Pulaski Bank (“Pulaski”), of Creve Coeur, Missouri. Filmore also was ordered to pay more than $6.3 million in restitution to Pulaski and currently owes Pulaski more than $5 million. On December 20, 2013, Filmore pled guilty in the United States District Court for the Eastern District of Missouri to one felony count of bank fraud as a result of his scheme.

Filmore, a long-time customer of Pulaski, defrauded Pulaski in a multi-year scheme involving at least 15 loans and more than $6 million. Filmore brokered medical equipment and needed to finance his acquisition of the equipment, which he later sold and leased to customers. To obtain financing from Pulaski, Filmore fabricated and altered brokerage account records which purportedly showed that he had millions of dollars in securities he had agreed to pledge as collateral for outstanding loans, including a $1 million line of credit. However, in reality, none of the collateral – in the form of securities or valuable medical equipment – existed. In November 2013, Pulaski discovered that Filmore had provided a fictitious purchase order for medical equipment with wiring instructions to a company Filmore controlled.

In January 2009, Pulaski Financial Corp., Pulaski Bank’s parent company, received approximately $32.5 million in Federal taxpayer funds through TARP. Treasury sold its stake in Pulaski at auction in July 2012, realizing a loss of approximately $3.6 million on taxpayers’ principal investment.

This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Missouri , the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.